Brent-WTI Spread Expands to Seven-Month High on Libya

Brent crude gained, extending its premium over West Texas Intermediate to a seven-month high, amid concern that recurring protests in Libya will disrupt the North African nation’s oil exports for an extended period.

Futures rose as much as 1.4 percent. Protests kept the country’s 120,000 barrel-a-day Zawiya refinery closed for more than a day, Ibrahim Al Awami, the oil ministry’s head of measurement and inspection, said by phone today. Another official later said the plant had reopened. In Iraq, eight people were killed in a triple bombing during a religious festival, the BBC reported.

“The Middle East continues to add a premium to oil prices, emanating either from uncertainty and attacks in Iraq or reduced supplies from Libya,” Abhishek Deshpande, an analyst at Natixis in London, said in an e-mail.

Brent for December settlement, which expires tomorrow, gained $1.15 to $106.96 a barrel on the London-based ICE Futures Europe exchange at 1:29 p.m. local time, having erased all of yesterday’s 59-cent decline. The more-active January contract traded $1.11 higher at $106.65. December Brent rose to a premium of $13.57 to the equivalent WTI contract, compared with $12.77 yesterday. It earlier widened to as much as $14.01, the biggest spread since April 2.

WTI for December delivery was at $93.42 a barrel in electronic trading on the New York Mercantile Exchange, up 38 cents. The contract slid $2.10 to $93.04 yesterday, the lowest since May 31. The volume of all futures traded was about 44 percent above the 100-day average.

Violent Protests

“There are still concerns over Libya as protests get more violent and the government is losing its grip,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said in an e-mail. “It does not look like they will resolve anything until next year.”

Protesters ended a demonstration at Libya’s Zawiya refinery, which is now working normally, Mohamed Elharari, a spokesman for state-run National Oil Corp., said by phone from Tripoli today.

Instability in Libya “lends support to Brent,” Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said by phone. “Libyan oil is mainly going to Europe because we have a shortage of high-quality oil.”

Kuwaiti Oil Minister Mustafa Al-Shemali said he expects no change in the output target for the Organization of Petroleum Exporting Countries when the group meets next on Dec. 4.

Formal Target

OPEC’s 12 members pumped 29.89 million barrels a day in October, little changed from September, the group said in its monthly Oil Market Report yesterday, citing data from secondary sources. That’s about 300,000 a day more than the average output it estimates markets will need next year, and 100,000 a day less than the group’s formal target.

Global oil demand will expand by 1.04 million barrels a day, or 1.2 percent, to 90.82 million in 2014, maintaining the group’s previous growth estimate.

Crude and refined-product inventories in industrialized nations equated to 58 days of consumption in the third quarter, compared with an average of 52.1 days from 2003 to 2007, according to the producer group.

Crude stockpiles in the U.S., the world’s biggest oil user, probably gained for an eighth week, a Bloomberg News survey shows before a report the Energy Information Administration expects to release tomorrow. Inventories probably climbed by 800,000 barrels to 386.2 million in the week ended Nov. 8, according to the median estimate of 11 analysts in the survey.

Technical Support

The EIA, the Energy Department’s statistical arm, is releasing its data a day later than usual because of the Veterans Day holiday on Nov. 11.

“The market is pre-empting another build-up of U.S. crude inventories,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney who predicts WTI has “minor” technical support at $91.26 a barrel. “More of it’s being produced, and not enough of it is being consumed.”

Gasoline inventories declined by 900,000 barrels, the survey shows. Distillate supplies, including heating oil and diesel, are expected to have decreased by 1 million.

The U.S. will surpass Russia and Saudi Arabia as the world’s largest oil producer by 2015, approaching energy self-sufficiency in the next two decades amid booming output from shale formations, the International Energy Agency said in its annual World Energy Outlook yesterday.

WTI dropped to the lowest in more than five months yesterday after investors reduced long positions, or bets that prices would rise, following the IEA report, Fritsch said.

To contact the reporter on this story: Lananh Nguyen in London at lnguyen35@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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