Oil drops on Libyan export resumption hopes
NEW YORK - Brent oil fell on Tuesday, giving back some of the previous session's sharp gains, on expectations that recent disruptions in exports from OPEC member Libya could be short-lived.
Brent rose 2.5 percent on Monday as reports of Libya's worst civil unrest since the civil war in 2011 fueled concerns over global oil supplies.
Libya's crude oil exports have slumped to around 90,000 barrels per day (bpd), less than 10 percent of capacity. Libya's prime minister said exports from the eastern port of Hariga with a capacity of 110,000 bpd would resume after one week. The OPEC member had brought exports back to around 450,000 bpd over the last month before this recent bout of unrest.
"I think the market is not expecting the disruption to last a long time, that it will last for a couple of weeks, that the government will get to the bottom of it," said Amrita Sen, a chief analyst at consultants Energy Aspects in London.
"That's been a big driver."
European benchmark Brent's premium over U.S. benchmark West Texas Intermediate (WTI) narrowed by around 40 cents on Tuesday, after widening by nearly $2 on Monday.
Brent futures for December fell 95 cents to $108.66 at 11:38 a.m. EDT (1538 GMT), after gaining $2.68 per barrel on Monday. U.S. light, sweet crude for December was down 49 cents at $98.19 a barrel.
Brent's premium over U.S. oil futures hinged upon whether Libyan supply would remain cut off. The spread was last trading at $10.60 per barrel after widening to $11.10 earlier in the session.
"I think that spread is moving out again if that goes on for awhile," said Gene McGillian, an analyst with Tradition Energy in Stamford, Connecticut. "Brent will catch more of a bid and WTI will be held back by the really strong production levels we see in North America."
A joint statement by the U.N. nuclear agency and Iran after talks on the Islamic state's nuclear program also helped limit recent gains in oil prices.
Oil markets have been balancing supply risks against rising inventories in the United States due to seasonal refining maintenance which has cut crude demand. Refiners on the Gulf Coast are expected to return from autumn work by mid-November.
Total U.S. crude oil stockpiles have risen 24 million barrels since mid-September, according to government data, as refineries remained offline for maintenance.