Brent Crude Futures Rise on Escalating Violence in South Sudan

Dec 24, 2013 8:09 am ET

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Dec. 24 (Bloomberg) -- Brent crude advanced to near its highest level in three weeks as violence in South Sudan forced a partial shutdown of oil production facilities.

Futures were up as much as 0.3 percent and are poised to end the year higher for the fifth time. Fighting in South Sudan, which exports about 220,000 barrels a day, has killed at least 500 people and led to the evacuation of employees from India’s Oil & Natural Gas Corp. There will be no floor or electronic trading tomorrow due to the Christmas holiday.

“There is thin holiday trading today and Brent prices are being sustained by political concerns surrounding South Sudan,” Andrey Kryuchenkov, an analyst VTB Capital in London, said by phone. “We’ll wait and see how the broader market reacts to the instability there as more news trickles out.”

Brent for February settlement rose as much as 34 cents to $111.90 on the London-based ICE Futures Europe exchange and was at $111.74 as of 1:08 p.m. in London. The contract closed at $111.77 on Dec. 20, the highest in more than two weeks. The volume of all futures traded was about 74 percent below the 100- day average. Prices have increased 0.7 percent this year.

West Texas Intermediate for February delivery was up 16 cents at $99.07 in electronic trading on the New York Mercantile Exchange. Brent was at a premium of $12.69 to WTI. The spread widened yesterday for a fourth day to close at $13.

UN Peacekeepers

UN Secretary General Ban Ki-moon asked the Security Council for 5,500 soldiers to add to the peacekeeping mission of 7,000 already in South Sudan. The U.S. is positioning troops in the Horn of Africa region to assist in any additional evacuations, Pentagon spokesman Colonel Steve Warren said yesterday.

“As the year comes to a close, the risk of an all out civil war that could stymie the country’s production of around 250,000 barrels a day is growing,” Vienna-based researcher JBC Energy GmbH said today in a note.

South Sudan has sub-Saharan Africa’s biggest oil reserves after Nigeria and Angola, according to BP Plc data.

WTI’s 200-day moving average is $98.88 today, according to data compiled by Bloomberg. Futures also halted a rally near this indicator two weeks ago. Sell orders tend to be clustered around technical-resistance levels.

Just Wait

“Crude is seeing some resistance around the 200-day moving average, and that’s giving traders a reason not to move too far away from this level,” Ric Spooner, a chief analyst at CMC Markets in Sydney, said today. “After recent gains, we are at a level where traders might be comfortable to just wait and see if the news can catch up to the prices. People in the market would want to square these long positions.”

Gasoline stockpiles stockpiles in the U.S., the world’s largest oil consumer, probably rose by 1.1 million barrels in the week ended Dec. 20, according to the median estimate of seven analysts surveyed by Bloomberg before Energy Information Administration data on Dec. 27. Supplies have climbed the previous four weeks to 220.5 million, said the EIA, the Energy Department’s statistical arm.

Crude inventories are projected to have decreased by 3 million barrels, the survey shows.

--With assistance from Ramsey Al-Rikabi in Singapore. Editors: Raj Rajendran, Dan Weeks