SINGAPORE, Nov 5 (Reuters) – Brent futures on Tuesday traded near a four-month low touched overnight, but worries over a prolonged outage from oil exporter Libya helped the benchmark hold above $106 a barrel.
Heavy shooting erupted early on Tuesday in the Libyan capital, Tripoli, the latest unrest in the OPEC producer that highlights the government’s inability to control militia groups.
A prolonged cut in exports just as refiners are expected to ramp up runs to meet winter demand for fuel may keep oil, particularly Brent, supported. (Full Story)
Brent crude LCOc1 was unchanged at $106.23 a barrel at 0733 GMT after hitting a four-month low of $105.13 overnight. U.S. oil CLc1 was up 6 cents at $94.68, having also slumped to a four-month low in the earlier session.
“Oil is looking for a bottom, and the downside we are seeing now is quite temporary,” said Tetsu Emori, a commodities fund manager at Astmax Investments. “The outage in Libya is keeping the demand-supply balance quite tight as we head into the peak heating oil demand season.”
Emori expects oil to trade in a tight range ahead of key data from the United States, including GDP and employment later this week, which will give investors a clearer view of the outlook for demand in the world’s biggest oil consumer.
Investors are also waiting for these U.S. numbers to gauge when the Federal Reserve may start to roll back its monetary stimulus. A cutback would reduce the supply of dollars, boosting the currency and making dollar-denominated assets such as oil more expensive for holders of other currencies.
Comments by top Fed officials overnight showed that a cut-back in the stimulus was not imminent. (Full Story)
LIBYA, OIL STOCKS
Recent protests and strikes at ports and oilfields have already knocked Libyan crude production down to some 10 percent of its capacity of 1.25 million barrels a day. (Full Story)
The gunfire in Tripoli comes after leaders of a movement for autonomy in the country’s oil-rich east unilaterally declared a regional government on Sunday. (Full Story)
The government has been trying to reopen eastern oil ports and fields blocked since summer by militias and tribes demanding a greater share of power and oil wealth.
“Libya is not a very big exporter, but it is not very small, either,” Emori said. “It is a factor that is supporting prices.”
Yet, expectations that crude stockpiles in the United States have risen capped gains in oil, particularly the U.S. benchmark.
A Reuters survey of six analysts taken ahead of weekly inventory reports from industry group the American Petroleum Institute (API) and the U.S. Energy Information Administration (EIA) forecast that crude stocks would increase by an average of 1.8 million barrels. EIA/S
Stockpiles in the United States have risen in the past few weeks because many refineries are shut for maintenance, while weak profits from processing a barrel of crude into products are discouraging those that are running from ramping up runs, reducing demand for crude.
There are “expectations a sixth consecutive increase in stockpiles would be announced later this week”, analysts at Phillip Futures said in a note. Data from the Energy Information Administration showing an increase in stockpiles would weigh on U.S. crude, the analysts said.
Also capping gains were hawkish comments from Chinese Premier Li Keqiang that signalled Beijing would continue to keep its tight stance on monetary policy.
Li warned against further expanding already loose money policies, and said China needs to sustain economic growth of 7.2 percent to ensure a stable job market. (Full Story)