NEW YORK: Brent crude oil edged higher yesterday but was headed for its second weekly decline, down more than three percent after a week of diplomatic progress in Syria and Iran drained some geopolitical risk premium from the market.
US crude fell, as yesterday’s expiration of the contract for October delivery prompted liquidation selling, traders said.
Global benchmark Brent crude was set for a big weekly drop on the partial return of Libyan output, a reduced prospect of military action against Syria and signals from Iran that it is looking for a thaw in relations with the West.
Brent crude for November rose 24 cents to $109.00 by 12.04pm EDT (1604 GMT). US crude for October, which expired yesterday, was down 79 cents to $105.60.
Brent’s premium over US crude widened to $3.40 from Thursday’s close at $2.90. The global benchmark gained some support from nagging concern about Libyan output, falling US crude inventories and the Federal Reserve’s decision this week to maintain economic stimulus.
In early September, Brent’s premium over US crude widened to over $8 when Libyan supplies were disrupted.
“The market had jumped all the way to $8 then went back to $3, so people who had sold Brent at that premium are now buying back Brent and selling WTI,” said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut.
As of Wednesday, Libya’s production had recovered to 620,000 barrels per day (bpd) after protesters agreed to reopen some oil fields. More than half the country’s production remains offline.
“Supply tightness seems to be easing but Libya’s export recovery is not something that’s being assured,” said Sijin Cheng, an analyst at Barclays.
Libyan output had collapsed to below 200,000 bpd in a stalemate between protesters and the government that lasted more than a month. Significant supply remains offline in Nigeria and in southern Iraq.
Reuters
