03 April 2014, News Wires – Brent crude edged down near a five-month low under $105 a barrel on Thursday as the market braced for a rise in Libyan supply after the government moved closer to a deal with rebels to reopen oil ports.
Brent has dropped more than $3 this week, narrowing its gap with the U.S. oil benchmark – a closely watched and heavily traded spread – to the slimmest it’s been since September.
Brent crude slipped eight cents to $104.68 a barrel by 1000 GMT, after falling nearly $1 on Wednesday to close at $104.79, the lowest settle price since early November.
US benchmark West Texas Intermediate fell 39 cents to $99.23 a barrel, holding above a one-week intraday low of $98.86 hit in the previous session.
Hopes were lifted for an end to an eight-month standoff that dried up petroleum revenue in Libya as a government spokesman said an agreement with rebels to reopen key oil ports could be finalised in two to three days.
The restart of Libya’s eastern oil ports could release about 600,000 barrels per day of crude, although some analysts remained cautious.
“I won’t rule out the possibility that it might be another empty promise but it definitely has an impact on market sentiment,” Phillips Futures analyst Tan Chee Tat said.
Goldman Sachs analysts said restarts at the ports will have a limited impact on global oil balances because Libya’s output is significantly below the bank’s forecast of 500,000 bpd.
Libya’s crude output has fallen to around 150,000 bpd from 1.4 million bpd in July when a wave of protests started across the vast north African country, whose proximity to Europe just across the Mediterranean makes it a strategic energy supplier.
In the short term, demand for Libyan oil is likely to be limited due to reliability issues, while shipping and insurance costs are expected to rise in light of the recent hostilities, the investment bank’s analysts, led by Jeffrey Currie, said in a note.
“We note that in that previous episode of negotiations, a final deal was not reached and as such we remain cautious to the possibility that the recent announcement simply reflects a change in bargaining power rather than a structural move toward consensus,” Goldman Sachs said.
US crude losses were checked by a surprise drop in inventories last week and as stockpiles at WTI’s delivery point in Cushing, Oklahoma, fell for the ninth week, Energy Information Administration data showed.
Brent’s premium to WTI stood at $5.30, off $4.81 reached on Wednesday, its narrowest in more than six months.
Oil may draw support from data showing US companies stepped up hiring in March, offering fresh evidence the economy was regaining momentum after a weather-driven lull over the winter.
A key senator has called upon Washington to allow the shipment of condensate, which has become abundant during the country’s energy boom, in an ongoing debate on a 40-year ban on most US crude exports.
Separately, Iran and Russia have made progress toward an oil-for-goods deal that sources said could be worth up to $20 billion and enable Tehran to boost vital energy exports in defiance of Western sanctions, people familiar with the negotiations told Reuters.