(For Bloomberg fair value curves, see CFVL <GO>)
Oct. 10 (Bloomberg) -- West Texas Intermediate rose from a three-month low on signs that lawmakers were getting closer to an agreement to increase the U.S. debt ceiling. Brent’s premium over WTI widened to a four-month high.
WTI rose 1.4 percent, advancing with equities as House Republican leaders proposed a short-term increase in the debt ceiling that would push off the lapse in U.S. borrowing authority through Nov. 22. Brent outgained WTI as the detention and release of Libya’s leader sparked concern that renewed instability may further curb the country’s exports.
“There is clearly a positive impact from Washington on all the markets, including energy,” said Tom Finlon, director of Energy Analytics Group LLC in Jupiter, Florida. “The proposal gives them some time to hash something out. The increasing value in Brent was clearly driven by the issues with Libya’s prime minister.”
WTI for November delivery advanced $1.40 to settle at $103.01 a barrel on the New York Mercantile Exchange. Yesterday’s settlement of $101.61 was the lowest since July 3. Volume was 28 percent above the 100-day moving average at 2:38 p.m. WTI is up 12 percent this year.
Brent for November settlement climbed $2.74, or 2.5 percent, to $111.78 a barrel on the London-based ICE Futures Europe exchange. The volume of all futures traded was 44 percent above the 100-day average. The North Sea crude’s premium over WTI ended the day at $8.77, the most since June 6.
House Speaker John Boehner’s plan, which would continue the government shutdown, marks the first sign that the parties may be able to resolve the impasse without the catastrophic economic consequences that the Treasury Department said would stem from a default.
Jay Carney, the White House press secretary, said that President Barack Obama would support a short-term increase in the U.S. debt limit with no “partisan strings attached,” though he prefers a longer extension.
Republicans have called for repealing or defunding Obama’s health-care law as a condition of lifting the debt ceiling. The Obama administration has said it won’t negotiate over funding the government or raising the debt ceiling, arguing that those are basic functions of Congress and shouldn’t be used as leverage.
“It looks like they are making some progress in Washington,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “The spread is widening as Brent is supported by the problems in Libya.”
Brent, a benchmark for more than a half of global traded oil, increased as much as 2.2 percent after Libya’s Prime Minister Ali Zaidan was released hours after being seized by a militia at a Tripoli hotel.
Zaidan has been “liberated” and is in good health, the state-run Libyan News Agency reported, citing Mohamed Kaabr, government spokesman. The group that took Zaidan did so based on false information that the public prosecutor had issued an arrest warrant for him, said Hashem Beshr, head of the Supreme Security Committee for Tripoli.
His detention came four days after U.S. forces seized Abu Anas al-Libi in Libya on suspicion of conspiracy to kill U.S. nationals and to conduct attacks against American interests worldwide. Militia violence, which has plagued Libya since the capture and death of former leader Muammar Qaddafi in 2011, has intensified in recent months with groups refusing to heed government calls to disband.
Protests have disrupted Libya’s oil production and exports. Output fell to 300,000 barrels a day in September, the least since the same month in 2011, according to data compiled by Bloomberg.
“I don’t view Libya as a functioning country and it’s bad for oil production,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion. “It does matter for Brent but it’s not a big deal for WTI. We are well supplied. WTI is probably going to remain under pressure.”
The protests cut the country’s production by an average of 1.2 million barrels a day last month, the Energy Information Administration said in a monthly report on Oct. 8. The total global outage averaged 3 million, unchanged from the revised August estimate, which was the highest level since EIA started keeping the statistic in January 2011.
The Organization of Petroleum Exporting Countries said the group’s output dropped to the lowest level in almost two years amid losses in Iraq. The organization is responsible for 40 percent of global oil supplies.
Its 12 members pumped 30.05 million barrels a day last month, the least since October 2011, OPEC said today in its monthly market report. Output from Iraq slumped by 370,300 barrels a day to 2.8 million amid maintenance at the Basrah terminal.
“Another thing that’s pushing up Brent is the drop in Iraq production,” Flynn said.
Implied volatility for at-the-money WTI options expiring in December was 19.8 percent, down from 21.4 percent yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 689,091 contracts as of 2:42 p.m. It totaled 637,412 contracts yesterday, 7.50 percent above the three-month average. Open interest was 1.86 million contracts.
--With assistance from Grant Smith in London. Editors: Richard Stubbe, Dan Stets