WTI Set for Second Weekly Drop as Libyan Output Returns

West Texas Intermediate headed for a second weekly loss as Libya’s oil output recovered and the threat of military strikes against Syria receded, damping concern that Middle East supplies may be disrupted.

Futures slipped in New York to bring their weekly loss to 2.5 percent. Libyan production will rise to more than half this year’s peak and five of the country’s nine export terminals are operating, according to its Oil Ministry. Syria will provide information about its chemical weapons and open facilities to inspectors, President Bashar al-Assad said Sept. 18 in an interview with Fox News.

“The Syrian-risk bullish driver has moved completely to the background and of course we’ve seen oil coming back in Libya with the western fields now online,” said Bjarne Schieldrop, chief commodity at SEB AB in Oslo. “We still have some tightness in the market, but we do expect prices to slide down further toward the fourth quarter.”

WTI for October delivery, which expires today, fell 94 cents to $105.45 a barrel in electronic trading on the New York Mercantile Exchange as of 1:40 p.m. London time. The more-actively traded November contract dropped 61 cents to $105.25. The volume of all futures traded was about 10 percent below the 100-day average.

Libyan Output

Brent for November settlement rose 15 cents, 0.1 percent, to $108.91 a barrel on the London-based ICE Futures Europe exchange. It lost 1.7 percent yesterday. The European benchmark was at a premium of $3.67 to WTI, compared with $2.90 yesterday, the smallest since Aug. 12.

Brent is “recovering a bit from yesterday’s massive sell-off,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London. “Fundamentals are not bearish. Libya is hardly pumping.”

Libyan oil output is set to rise to 800,000 barrels a day, Ibrahim Al Awami, director of measurement at the country’s oil ministry, said by phone from Tripoli yesterday. Supply fell to as low as 150,000 barrels earlier this month, compared with a 2013 high of 1.4 million in April, the International Energy Agency said in a Sept. 12 report.

Further Retreat

Oil prices will drop further next week after a U.S.-Russian accord reduced the risk of an American attack on Syria, according to a Bloomberg survey of 34 analysts.

Crude rose to a two-year high on Aug. 28 amid concern that a U.S.-led assault would widen the Syrian conflict and disrupt Middle East exports. Syria borders Iraq and is near Iran, which together control almost a fifth of OPEC production capacity, Bloomberg estimates show. The Middle East accounted for 35 percent of global oil output in the first quarter of this year, according to the IEA.

Assad’s government must turn over a full inventory of Syria’s chemical weapons arsenal by tomorrow, according to the U.S.-Russia deal struck last week in Geneva in response to the Aug. 21 sarin gas attack near Damascus that the U.S. says killed more than 1,400 people.

About 2.7 million barrels day of oil production was off-line during August in Libya, Iran, Iraq, Nigeria, Sudan and other nations, according to a Sept. 10 report by the U.S. Energy Information Administration. That’s the highest level of unplanned disruptions since at least January 2011, the EIA said.

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