Brent and West Texas Intermediate crudes dropped for the first time in three days after Libyan rebels surrendered control of two oil ports to the government, enabling the country to bolster exports.
Brent decreased 0.8 percent. The self-declared Executive Office for Barqa turned over the oil terminals of Hariga and Zueitina overnight and will relinquish the other two ports they control in two to four weeks, said Ali Al-Hasy, a spokesman for the group. Libya’s output fell to 250,000 barrels a day in March from 1.4 million a year earlier, according to data compiled by Bloomberg.
“The possibility that Libyan barrels are returning to the market is weighing on oil,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Rising supplies will drive the market lower.”
Brent for May settlement slid 90 cents to end the session at $105.82 a barrel on the London-based ICE Futures Europe exchange. The volume of all futures traded was 28 percent higher than the 100-day average at 3:49 p.m. in New York. The May and June Brent contracts closed at the same price. Front-month futures had ended the day higher than the next month every day since Nov. 7.
WTI for May delivery decreased 70 cents, or 0.7 percent, to settle at $100.44 barrel on the New York Mercantile Exchange. Volume was 21 percent above the 100-day average. The U.S. benchmark grade’s discount to Brent shrank to $5.38 from $5.58 on April 4.
Hariga has a capacity of 110,000 barrels a day, and Zueitina can handle 70,000, according to IHS Inc., a consultant based in Englewood, Colorado. The other two terminals are Es Sider, the nation’s largest port at 340,000 barrels a day, and the Ras Lanuf terminal with 220,000.
The port opening “is definitely a bearish development,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “But we have to see if that comes to fruition.”
Libya currently exports about 85,000 barrels a day of crude from the offshore fields of Jurf and Bouri, which are unaffected by the protests that have disrupted output on land, according to the Oil Ministry.
“The protesters are banned from returning or obstructing work at the ports,” Justice Minister Salah Al-Mirghani said after talks with rebels yesterday in Zueitina.
Libya, the holder of Africa’s biggest crude reserves, has become the smallest producer in the 12-member Organization of Petroleum Exporting Countries as rebels seeking self-rule in the eastern region of Cyrenaica halted production and shipments.
“If Libyan production does increase, it should provide some pressure on Brent relative to WTI,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC.
U.S. stocks fell as technology and consumer shares extended last week’s slide. The Standard & Poor’s 500 Index dropped as much as 1.3 percent and the Dow Jones Industrial Average slipped 1 percent.
An Energy Information Administration report on April 9 will probably show that U.S. crude inventories rose 1.4 million barrels last week, according to a Bloomberg survey. Supplies dropped 2.38 million barrels in the week ended March 28, the first decline since January, as a three-day closure of the Houston Ship Channel curbed imports.
Implied volatility for at-the-money WTI options expiring in May was 18.1 percent, up from 16.3 percent April 4, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 537,591 contracts at 3:51 p.m. It totaled 457,648 contracts April 4, 14 percent below the three-month average. Open interest was 1.66 million contracts.