Brent rises on supply concerns
Brent crude rose towards $111 today, extending its gains from a month-low hit in the previous session, as Libya's precarious security situation and lower North Sea production stoked supply fears.
Opec member and Africa's third biggest producer Libya swiftly ramped up oil output after last year's revolution, but an assault last week on the US consulate heightened fears about the new government's ability to impose its authority, and this is likely to delay the already-slow return of expatriate oil workers to the country.
"We saw oil prices spike up around 30-32 per cent last year when Libya was out of the market," said Natalie Rampono, a commodity strategist at ANZ. "This is something to focus on, especially if the security situation deteriorates.”
Brent rose 47 cents to $110.50 a barrel at 7.10am (Irish time), after hitting a high of $110.75 earlier in the session. Brent hit a low of around $107 per barrel yesterday, its weakest since August 3rd.
US crude was up 71 cents at $93.13 a barrel. The October contract yesterday at $91.87 a barrel.
Brent futures are down 5.3 per cent so far this week, heading for their steepest drop since late June, after key exporter Saudi Arabia pledged to keep prices low, the US mulled release of strategic reserves and the still weak global economy kept demand subdued.
US crude is also down about 6 per cent for the week, poised for its biggest weekly drop in about four months.
Adding to the worries about supply disruptions, two more cargoes of North Sea Forties crude loading in October were delayed because of lower production.
Export delays in September and October have been the most significant since May's loading programme, when 11 Forties cargoes out of 19 originally planned were deferred, according to Reuters records based on information from trade sources.
The North Sea Forties crude is the most important of the four grades that form the Brent crude basket, and disruptions in its supply exert more influence on the benchmark's prices.
The 200,000-bpd Buzzard field, the largest connected to the Forties pipeline, began a shutdown around September 5th that is expected to take 28 days. Traders said it was now expected to restart three to five days later than originally planned.
Unless there is an uptick in demand, analysts say the medium-term outlook for crude remains weak, as supplies are plentiful while the global economy struggles.
Yesterday, manufacturing reports from the euro zone, China and the United States showed factory activity remained lacklustre, further evidence of sluggish global growth.
"As the much anticipated monetary stimulus programs are now more or less in place, the focus is shifting back towards economic data and key political milestones for the euro zone," J.P. Morgan analysts said in a report.
"US data has been mixed ... the most recent Chinese trade and survey data also offers few signs of a turnaround. Next week the euro zone will likely return to focus, with Greece, Spain and France unveiling fiscal plans and budgets," they added.