29 April 2014, News Wires – Brent crude held steady at above $108 a barrel on Tuesday after posting its biggest daily fall in nearly a month on an imminent rise in Libyan exports, while investors shrugged off more US sanctions on Russia.
Libya is lifting force majeure from the eastern Zueitina oil port on Monday, state-run National Oil Corporaion said, paving the way to restart exports at a second port after a deal with rebels to unblock major terminals.
June Brent crude gained 13 cents to $108.25 a barrel early on Tuesday after a 1.4% drop on Monday. US crude for June delivery edged up 3 cents to $100.87 a barrel after settling up 24 cents in the previous session.
Investors were still cautious about Libya’s output despite news on Zueitina’s restart, said Mark Keenan, who heads commodities research in Asia at Societe Generale.
“The market has responded to it but until we see tankers actually loading, rather than it just being ready to receive tankers for loading, there still will be an element of caution and risk premium in the Brent prices,” he said.
Geopolitical risks stemming from the east-west conflict over Ukraine also underpinned oil prices although analysts do not expect sanctions to have a direct impact on Russian energy supply.
“It’s very unlikely that any formal sanctions will extend to the crude oil or energy channels,” Keenan said. “They rely too much on each other if you take Russia and Europe together.”
Financial markets largely shrugged off fresh US sanctions imposed on Russian companies and government officials on Monday, while the international oil business played it down, with traders and global companies forecasting “business as usual”.
An escalation in tensions could strengthen Brent spreads in the third quarter, especially with the September-December spread currently low compared with previous years, Citibank analysts said in a 28 April note.
In the US, investors may be priming for a further drop in crude stocks at Cushing, Oklahoma, which have touched a five-year low as new pipeline capacity diverted oil from the delivery point for West Texas Intermediate contracts to the Gulf Coast, although the country’s stockpiles are set to post a fresh high.
Brent’s premium to WTI narrowed by nearly $2 to $7.28 on Tuesday.
“Now that crude can seamlessly move between PADD 2 and PADD 3, they really need to be looked at together as one region,” Keenan said, referring to the US Mid-West and Gulf Coast areas. “Until that fully develops, the tightness of Cushing inventories will maintain an element of support on the WTI side.”
US commercial crude stockpiles were forecast to have risen 1.9 million barrels last week, a preliminary Reuters poll of six analysts showed. Crude inventories hit 397.7 million barrels the previous week, the highest since records began over 30 years ago.
