Oil gained for a third day in New York, after a Saudi Arabia-based economist said the holder of the world’s biggest crude reserves cut production this month, signaling supply may shrink.
Futures climbed as much as 0.6 percent today, paring the week’s decline to 3.7 percent, after John Sfakianakis, chief economist at Riyadh-based Banque Saudi Fransi, said the kingdom reduced output by 300,000 barrels a day. Barclays Plc said the country may be lowering production of its lighter oil blends introduced in response to the slump from Libya. Prices also advanced yesterday after the U.S. dollar fell, increasing the appeal of raw materials.
“Reduced production of the country’s lighter blends in response to Libyan outages suggests supply may tighten,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a note today. “On the other hand, it could imply that demand is weak for Saudi light crude blends. The weaker U.S. dollar helped” prices, he said.
Crude for May delivery gained as much as 63 cents to $108.74 a barrel, in electronic trading on the New York Mercantile Exchange, and was at $108.58 at 9:10 a.m. Singapore time. Yesterday, the contract increased $1, or 0.9 percent, to settle at $108.11. Prices are up 27 percent from a year ago.
Brent oil for June settlement rose 45 cents, or 0.4 percent, to $122.45 a barrel on the London-based ICE Futures Europe exchange. Yesterday, it fell 33 cents to $122. The May contract, which has expired, slid 52 cents, or 0.4 percent, to close at $122.36 yesterday.
The European benchmark traded at a premium of $14.25 a barrel to U.S. futures yesterday. The difference between front-month contracts in London and New York surged to a record $19.54 on Feb. 21 as unrest spread in the Middle East and North Africa and stockpiles climbed at Cushing, Oklahoma, the delivery point for New York futures. The spread averaged 76 cents last year.
Saudi Arabia, the biggest oil producer in the Organization of Petroleum Exporting Countries, pumped 9 million barrels of crude a day in March, the highest level since October 2008, according to data compiled by Bloomberg News.
Falling Libyan crude output increased prices for comparable low-density, low-sulfur grades. Saudi Arabia developed two blends to offset the shortfall.
The conflict in Libya is the bloodiest in a wave of uprisings that has toppled leaders in Egypt and Tunisia and spread to Algeria, Bahrain, Iran, Oman, Syria and Yemen.
The chief of the North Atlantic Treaty Organization said yesterday that the alliance needs more attack jets to target Libyan ground forces, putting pressure on the U.S. military to step back into the air campaign against Muammar Qaddafi’s troops.
Oil in New York also rose yesterday after the dollar dropped as U.S. initial jobless claims rose and producer prices advanced at a slower pace, signaling the Federal Reserve will keep borrowing costs low.