Brent Falls to Two-Week Low as Libya Oilfield Seen Restarting

Jan 02, 2014 8:18 am ET

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Jan. 2 (Bloomberg) -- Brent crude tumbled to its lowest level in two weeks as protesters at Libya’s Al Sharara field ended their three-month blockade and said work can resume.

Brent slipped as much as 1.4 percent to its weakest intraday price since Dec. 19, wiping out an earlier advance of 0.5 percent. Demonstrators at the 300,000 barrel-a-day Al Sharara site in Libya, holder of Africa’s biggest oil reserves, said they suspended protests for two weeks as of yesterday after an agreement with the country’s defense minister. U.S. crude inventories probably fell for a fifth week, a Bloomberg survey showed before data tomorrow.

“That’s the most positive Libya headline we’ve had in a while,” Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a researcher in London, said today by e-mail.

Brent for February settlement dropped as much as $1.52 to $109.28 a barrel and was at $109.87 as of 1:16 p.m. on the London-based ICE Futures Europe exchange. The European benchmark crude was at a $11.86 premium to West Texas Intermediate, compared with $12.11 on Dec. 31. Brent slipped 0.3 percent in 2013, the first annual decline in five years.

WTI for February delivery fell as much as 88 cents to $97.54 a barrel in electronic trading on the New York Mercantile Exchange and was at $97.71. The volume of all contracts traded was about 8 percent below the 100-day average. WTI gained 7.2 percent in 2013.

Libya Protests

Workers at Al Sharara are waiting for the government to restart operations, Muftah Lamin, a spokesman for the group, said by phone today from the nearby city of Ubari. Protests will resume if their requests, which include services for the city, aren’t met within the next two weeks, Lamin said.

“Exports from Sharara would be easier to materialize if the protests are indeed lifted as the field exports from the port of Zawiya and that port is open,” said Olivier Jakob, managing director at Petromatrix GmbH, a consulting company in Zug, Switzerland. “If Sharara restarts it would also make it easier to run the Zawiya refinery and could then reduce the imports of products.”

Sudan Emergency

South Sudanese President Salva Kiir declared a state of emergency in two regions as the government prepared to start peace talks with rebels to stop violence that’s brought the country to the brink of a civil war since it began in mid- December.

The condition will apply to the oil-producing Unity region and the state of Jonglei, the government said on its Twitter account today. Violence has cut the country’s crude production to 200,000 barrels a day from 245,000.

The Energy Information Administration is predicted to report that crude stockpiles decreased by 2.83 million barrels to 364.7 million last week, according to a Bloomberg News survey before the data is released at 11 a.m. Washington time tomorrow.

The EIA data will probably show gasoline stockpiles rose 1.38 million barrels to 221.2 million during the week ended Dec. 27, according to the survey. Inventories of distillate fuel advanced 750,000 barrels to 114.9 million.

China’s Purchasing Managers’ Index for December was at 51, the National Bureau of Statistics and China’s logistics federation said yesterday in Beijing. That was less than the median 51.2 estimate in a Bloomberg survey and November’s 51.4. China is the world’s second-largest oil user.

Manufacturing Data

“The market will be focused on PMI figures, the U.S. in particular, as well as the inventory figures,” said Ric Spooner, chief analyst at CMC Markets in Sydney.

A separate Chinese manufacturing index by HSBC Holdings Plc and Markit Economics released today came in at 50.5, matching estimates. A reading of more than 50 indicates expansion. Euro- area factory output expanded for a sixth month in December, London-based Markit Economics said. PMI data from the U.S. will be released later today.

The U.S. and China are the world’s largest oil users, accounting for 21 percent and 11 percent, respectively, of demand last year, according to the International Energy Agency.

OPEC crude production dropped to the lowest level in more than two years in December, led by a decline in Venezuelan output, a separate Bloomberg survey showed.

Output by the 12-member Organization of Petroleum Exporting Countries decreased 33,000 barrels to an average 29.955 million barrels a day last month from 29.988 million in November, the survey of oil companies, producers and analysts showed. Production slipped to the lowest level since July 2011 as ministers decided to keep their output target unchanged at 30 million barrels a day on Dec. 4 in Vienna.

--With assistance from Winnie Zhu in Singapore. Editors: Raj Rajendran, John Deane