Oil strengthens as Libya conflict offers relief from glut
Oil advanced for the first time in three days amid speculation that an escalating conflict in Libya may pare a global surplus that's driven crude into a bear market. Brent futures rose 0.2 percent in London. Fires have been extinguished at three of five tanks at Es Sider, Libya's largest oil port, which were set ablaze after an attack by militants, said Ali alHasy, a spokesman for the Petroleum Facilities Guard. Algerian Energy Minister Youcef Yousfi called on the Organization of Petroleum Exporting Countries to cut output to boost prices, the Associated Press reported.
Oil plunged 46 percent this year, set for the biggest annual drop since 2008, as OPEC resisted supply cuts to defend market share in response to the highest U.S. production in three decades. Libya pumped 580,000 barrels a day in November, down from about 1.59 million at the end of 2010, according to data compiled by Bloomberg. Trading was below average amid Christmas and New Year holidays.
"The main development over Christmas has been the attack on the Es Sider terminal in Libya and the fire that followed on the tank farm," Olivier Jakob, managing director at consultants Petromatrix GmbH, said by e-mail from Zug, Switzerland. "Libya can help Brent to stabilize." Brent for February settlement gained 30 cents to $59.75 a barrel on the London-based ICE Futures Europe exchange at 9:52 a.m. local time. The contract declined 79 cents to close at $59.45 on Dec. 26, capping a fifth weekly loss. The amount of trading was about half the 100-day average for the time of day.
WTI for February delivery increased as much as $1.01, or 1.8 percent, to $55.74 a barrel in electronic trading on the New York Mercantile Exchange. It slid $1.11 to $54.73 on Dec. 26. The volume of all futures traded was 17 percent below the 100-day average.
Libya's oil production slumped after a civil war that began in 2011 when dictator Muammar Qaddafi died after a 42year rule. The tank fires started on Dec. 25 after the Petroleum Facilities Guard gave Islamist militias an ultimatum before air strikes and the rebels fought back with rockets. The Es Sider facilities have a total storage capacity of 6.2 million barrels, according to Mohamed Elharari, a spokesman at National Oil Corp. Libya's third-largest port of Ras Lanuf was also halted this month by fighting. The country pumped 352,000 a day on Dec. 25, he said.