Brent fell to its lowest intraday level in two months following the first increase since March in oil supply from Libya, holder of Africa’s biggest reserves.
Brent slipped for a third day in London to its weakest since Nov. 12. 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 advanced for a second day on forecasts that 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 fell as much as 59 cents, or 0.6 percent, to $105.80 a barrel on the ICE Futures Europe exchange and traded for $106.24 as of 1:23 p.m. in London. The European benchmark crude’s premium to WTI dropped to as little as $12.81, the narrowest since Jan. 6.
WTI for February delivery was at $93.03 a barrel in electronic trading on the New York Mercantile Exchange, up 44 cents. The volume of all futures traded was about 7 percent above the 100-day average. The grade has lost 5.5 percent in 2014, the worst start to any year since 2009.
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.
“A further Brent price slide is probable because the market expects the oil supply to continue growing,” Carsten Fritsch, an analyst Commerzbank AG in Frankfurt, said in a report. “With the help of mediators, the government in Libya is, for example, keen to resume oil shipments from the oil terminals in the east of the country.”
While prices have dropped, the premium of front-month Brent to the second month, or backwardation, has strengthened amid glitches at the North Sea Buzzard oil field curb, Olivier Jakob, managing director at consultant Petromatrix GmbH, said in a report. Front-month Brent is about 74 cents a barrel more than the second month, the most since October, if price movements around contract expiry dates are excluded, the Zug, Switzerland-based company said.
Buzzard feeds into the Forties crude stream, one of four grades used to price the Dated Brent benchmark.
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.
Gasoline inventories are forecast to have climbed by 2.5 million, according to the survey, compared with a 5.36 million gain reported by the API. 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. The U.S. is the biggest user of oil.
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 $93.10 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.