Brent Falls on Libya as WTI Discount Shrinks

Brent crude fell for the first time in three days on speculation that Libyan oil exports will increase next week. West Texas Intermediate’s discount to Brent shrank to the least in almost seven months.

Futures in London dropped 0.5 percent while WTI slipped 0.2 percent. Libya aims to ship the first tanker from the harbor of Hariga since rebels handed the terminal over to the government earlier this week, an oil ministry official said. The possible return of supply is weighing on prices, said Seth Kleinman, Citigroup Inc.’s London-based head of energy research.

“Brent has been moving on the latest developments in Libya for a while now,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “It looks like exports should recover somewhat, which is putting downward pressure on Brent and narrowing the spread with WTI.”

Brent for May settlement decreased 52 cents to end the session at $107.46 a barrel on the London-based ICE Futures Europe exchange. The volume of all futures traded was 9.7 percent below the 100-day average at 4:03 p.m. in New York.

WTI for May delivery fell 20 cents to settle at $103.40 a barrel on the New York Mercantile Exchange. Volume was 5.9 percent more than the 100-day average. The contract advanced $1.04 to $103.60 yesterday, the highest close since March 3.

Brent, which is used to price more than half of the world’s crude and, unlike WTI, can be exported, is often more sensitive to changes in the global supply-and-demand balance. The European grade closed at a $4.06 premium to WTI, the least since Sept. 19 on a settlement basis.

Libyan Deal

Libyan lawmakers will meet on April 13 to discuss a deal that returned the two ports the government, potentially tripling the country’s oil exports. Rebels seeking self-rule in the country’s east retain control of Es Sider and Ras Lanuf harbors. Some members of parliament objected to a clause in an agreement with the rebels that requires salary payments to defectors from government forces, Sliman Qajam, a lawmaker, said yesterday.

Hariga can load 110,000 barrels of crude a day, according to the oil ministry. That’s 8.5 percent of Libya’s daily export capacity of 1.3 million barrels. The country holds Africa’s largest oil reserves. Output has declined by more than 1 million barrels a day in the past year, making it the smallest producer in the Organization of Petroleum Exporting Countries.

Brent also weakened after exports and imports unexpectedly declined last month in China, the world’s second-biggest crude consuming country, and OPEC trimmed estimates for the amount of oil it will need to produce.

China’s overseas shipments shrank 6.6 percent in March from a year earlier, compared with a median 4.8 percent expansion forecast in a Bloomberg survey of 47 economists. Imports were down by 11 percent, the General Administration of Customs said in Beijing today.

OPEC Projection

OPEC, responsible for 40 percent of the world’s oil supply, will need to provide an average of 29.6 million barrels a day of crude this year, according to its monthly market report. The assessment is 100,000 barrels a day lower than last month’s because of higher output from the U.S. and Canada.

U.S. crude production rose 37,000 barrels a day last week to 8.23 million, the highest rate since 1988, according to an Energy Information Administration report yesterday. Stockpiles grew 4.03 million barrels, more than five times as much as analysts forecast, to a four-month high of 384.1 million barrels, the EIA data showed.

“Yesterday’s report was quite bearish,” said Kyle Cooper, director of commodities research at IAF Advisors in Houston. “Supplies climbed and production was at a multidecade high.”

Implied volatility for at-the-money WTI options expiring in June was 16.4 percent, down from 16.7 yesterday, data compiled by Bloomberg showed.

Electronic trading volume on the Nymex was 477,787 contracts at 3:04 p.m. It totaled 789,212 contracts yesterday, 45 percent above the three-month average. Open interest was 1.67 million contracts.

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