Brent Extends Weekly Gain on Libya Fighting; WTI Climbs

Brent extended its first weekly gain this month amid speculation escalating violence in Libya will further disrupt supplies from the holder of Africa’s biggest oil reserves. West Texas Intermediate also rose in New York.

Futures climbed as much as 0.5 percent in London. Libya accused a retired army general in the eastern city of Benghazi of planning a coup while the nation’s General Assembly in Tripoli was said to be suspended after it was stormed by a militia. Libyan crude production is down about 80 percent from a year ago, data compiled by Bloomberg show.

“A restart from Libya is needed to balance the global supply-demand in the third quarter and for now that is still not coming,” Olivier Jakob, managing director at Petromatrix GmbH in Zug, Switzerland, said by e-mail. Recent efforts to restore Libyan production didn’t last long, so the situation was already “a case of waiting to see it before you believe it,” he said.

Brent for July settlement increased as much as 58 cents to $110.33 a barrel on the London-based ICE Europe Futures exchange and was at $110.17 at 12:55 p.m. London time. The volume of all futures traded was about 19 percent below the 100-day average for the time of day. Prices advanced 1.7 percent last week, snapping a two-week losing streak.

WTI for June delivery rose as much as 81 cents, or 0.8 percent, to $102.83 a barrel in electronic trading on the New York Mercantile Exchange. The contract expires tomorrow. The more-active July future was up 75 cents at $102.33. The U.S. benchmark crude was at a discount of $7.84 to Brent on ICE.

Libyan Output

Libya, a member of the Organization of Petroleum Exporting Countries, has struggled to restore security three years after the revolt that toppled former leader Muammar Qaddafi. Oil production declined to 215,000 barrels a day in April, about 13 percent of capacity, data compiled by Bloomberg show. Brent’s gains following the latest unrest may have been limited because exports have been constricted since July and previous signs of a resumption have typically faltered.

Libya’s crude production “is already impaired and certainly not positive, which should be supportive of higher prices,” Michael McCarthy, a chief strategist at CMC Markets in Sydney, said by phone today. “Adding the potential for escalation in Ukraine, it’s quite clear the risks are that oil is on the upside this week.”

The North African country’s General Assembly has been replaced by a 60-member group that will work with an election commission, Colonel Mukhtar Fernana, who is loyal to dissident army general Khalifa Haftar, said in a speech aired on Al-Jazeera television.

Libya’s government yesterday accused Haftar, who is battling Islamic militants in the eastern city of Benghazi, of planning a coup and threatened to punish any military units that join him. The government, parliament and chief of staff issued a joint statement on May 17 “calling on the population of Benghazi to remain united and defeat the coup plotters,” according to LANA, the official news agency.

Crimea Precursor

In Ukraine’s Donbass regions of Donetsk and Luhansk, masked men set fire to a candidate’s regional campaign office ahead of a May 25 presidential ballot. Pro-Russian separatists, who control buildings and radio and television towers in about 15 cities, said they may hold a vote on Sept. 14 to elect officials for their self-proclaimed “Donetsk People’s Republic.”

The North Atlantic Treaty Organization has expressed concern that the referendums may be a precursor to a land grab similar to Russia’s annexation of the Black Sea peninsula of Crimea in March.

Bullish Bets

Tension between Ukraine and Russia, the world’s largest energy exporter, are among factors that may help Brent to “sustainably hover” above $100 a barrel, Gordon Kwan, the regional head of oil and gas research at Nomura Holdings Inc. in Hong Kong, said in an e-mailed note today.

Hedge funds and other large speculators boosted bullish bets on WTI by 11,652 futures and options combined, or 3.9 percent, to 311,195 in the week ended May 13, according to data from the U.S. Commodity Futures Trading Commission. That’s the first gain in four weeks.

Money managers increased net bullish bets on Brent over the same period by 7,525 contracts, or 4.5%, to the highest level in two weeks, according to data from ICE.

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