Brent crude trades near two-month low as Libya output recovers

Brent traded near its lowest closing level in two months following the first increase since March in oil supply from Libya, holder of Africa’s biggest reserves.

Futures were little changed in London after declining for the past two days. Libya tripled output to about 650,000 barrels a day in the three weeks to Jan. 13 after talks with protesters enabled the restart of Sharara, its second-biggest field, earlier this month, according to the government. West Texas Intermediate fluctuated amid speculation U.S. crude stockpiles declined for a seventh week.

“Investors have turned back to fairly comfortable long term fundamental prospects, partly because of a modest recovery in Libyan supplies recently,” said Andrey Kryuchenkov, an analyst at VTB Capital in London. “Today, market participants will pay close attention to the U.S. weekly fuel inventory numbers.”

Brent for February settlement was down 1 cent at $106.38 a barrel on the ICE Futures Europe exchange as of 9:31 a.m. in London. It slipped 0.3 percent to $106.39 yesterday, equal to the settlement on Jan. 9, which was the lowest since Nov. 12. The European benchmark crude was at a premium of $13.66 to WTI, compared with $13.80 yesterday.

WTI for February delivery was at $92.72 a barrel in electronic trading on the New York Mercantile Exchange, up 13 cents. The volume of all futures traded was about 31 percent below the 100-day average. The grade has lost 5.8 percent in 2014, the worst start to any year since 2009.
Sharara Production

Production from Libya’s Sharara field reached 322,000 barrels a day and the demands of protesters who threatened to shut it again have been met, Mohamed El Harari, spokesman for state-run National Oil Corp., said in a telephone interview from Libyan capital of Tripoli.

U.S. crude inventories shrank by 1.3 million barrels, or 0.4 percent, to 356.6 million barrels last week, according to a Bloomberg News survey before an Energy Information Administration report today. Supplies slid by 4.14 million, the industry-funded American Petroleum Institute said yesterday.
U.S. Inventories

Gasoline inventories are forecast to have climbed by 2.5 million, compared with a 5.36 million gain reported by the industry group. Refinery utilization rates slid 0.4 percentage points to an average 91.9 percent of capacity, the survey shows.

The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the EIA. The Energy Department’s statistical arm will release its Weekly Petroleum Status Report at 10:30 a.m. in Washington.

Brent may decline to $100 to $108 a barrel this year, while WTI may average $97 to $105, according to forecasts from China National Petroleum Corp. Oil demand in China, the world’s second-largest consumer, will increase by about 4 percent to 518 million metric tons.

WTI fell 1.3 percent last week as U.S. fuel supplies expanded and a measure of demand decreased to the lowest since June. Distillate inventories, including heating oil and diesel, probably rose by 1.25 million barrels in the week ended Jan. 10, according to the median estimate of 11 analysts surveyed by Bloomberg. Stockpiles slid 1.7 million, the API said yesterday.

WTI has technical support along its 30-day lower Bollinger Band, at about $91.15 today, according to data compiled by Bloomberg. Futures halted intraday losses near this indicator three times in the past week. Buy orders tend to be clustered around chart-support levels.