Brent crude futures rise on Libya unrest

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Brent crude futures rise on Libya unrest

Brent crude oil futures rose on Tuesday as violent clashes at a major Libyan port heightened concerns about potential supply disruptions in the Middle East, reversing losses caused by concerns about the U.S. Federal Reserve’s monetary easing policy.

U.S. crude oil fell, however, on the report of a shutdown of the Seaway pipeline, which carries crude oil from Cushing, Oklahoma, the delivery point for the futures’ benchmark West Texas Intermediate crude, to refineries on the Gulf Coast.

The Brent-WTI spread widened to its largest since July, passing through its 50-day moving average for the first time in five months.

“We were down early on tapering concerns, and what seemed to turn the momentum around were concerns about clashes in Libya,” said Phil Flynn, an analyst with Price Futures Group in Chicago.

Brent crude oil futures for October rose 49 cents to trade at $110.39 a barrel at 1:45 p.m. after trading as low as $108.61 earlier in the session.

U.S. crude oil futures for September delivery, which expire at the end of the trading session, were down $1.79 to $105.31 near midday and near the session low of $105.23.

October U.S. futures were trading $1.31 lower at $105.55, making the second-month contract pricier than the front-month, a market structure known as “contango,” for the first time since July.

The Libyan government asked tankers to leave the port of Es Sider, the country’s largest, after striking workers at several major oil terminals allegedly attempted to sell crude themselves, bypassing the official force majeure shutdown.

The head of Libya’s Petroleum Facilities Guard said striking workers at Zuetini, the country’s third-largest oil port, fired on civilians and injured at least one person.

Independent confirmation of the shooting was not available.

Worries that the situation in Libya would continue to deteriorate helped support Brent crude prices, reversing earlier losses. About half of Libya’s more than 1.2 million barrel-per-day export capacity remains shut down due to civil unrest, industry sources said.

At the same time, U.S. oil prices slipped as traders took profit fearing the U.S. government would lay out plans to pull back its monetary easing program, which could ultimately dampen oil demand in the world’s largest oil consumer.

The Fed released minutes from its latest policy meeting yesterday. However, the release is made after Korea JoongAng Daily deadline.

Many believe tapering could begin next month. U.S. oil prices remained range bound between $103 and $108 per barrel, noted Gene McGillian, an analyst with Tradition Energy in Stamford, Connecticut.

Not even an expected draw in crude oil inventories was supporting prices, he said.

“This does seem to be predicated on expectations of what the Fed will do,” he added.

Reuters

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