Brent Slips After Biggest Gain in Three Months Amid Libya Return

Feb 10, 2014 8:55 am ET

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Feb. 10 (Bloomberg) -- Brent retreated after its biggest advance in three months as Libya continued to restore supplies and Saudi Arabia boosted crude sales in January.

Futures lost as much as 0.6 percent in London, after a 2.2 percent rally on Feb. 7 that was the largest since October. Libya, a member of the Organization of Petroleum Exporting Countries, increased production after protests at the country’s Sharara field ended, according to National Oil Corp. Saudi Arabia, while trimming output last month, increased shipments to the market to 9.916 million barrels a day, according to a person with knowledge of the country’s supplies.

“With the partial recovery of Libyan supplies, the spare capacity of OPEC will be increasing and that scenario is not too far off,” said Andy Sommer, an analyst at Axpo Trading AG in Dietikon, Switzerland.

Brent for March settlement fell as much as 70 cents to $108.87 a barrel on the ICE Futures Europe exchange and was at $109.40 as of 1:28 p.m. London time. The European benchmark jumped $2.38, or 2.2 percent, to $109.57 on Feb. 7, the biggest daily increase since Oct. 28. It was at a premium of $9.61 a barrel to West Texas Intermediate. The spread on the ICE exchange widened for a third day on Feb. 7 to close at $9.69.

WTI for March delivery dropped 10 cents to $99.78 a barrel in electronic trading on the New York Mercantile Exchange. The contract gained $2.04 to $99.88 on Feb. 7, the highest close since Dec. 27. Prices are up 1.4 percent this year.

Libya Returns

Libya is pumping about 600,000 barrels a day, and exporting 440,000 barrels of this, Mohamed Elharari, a spokesman for state-run National Oil Corp., said by phone from Tripoli. Output from the second-largest oil field, Sharara, expanded to 327,000 barrels a day after protesters re-opened a pipeline valve near Zintan, he said. Production remains less than half of total capacity as demonstrations continue to halt export terminals in the east of the country.

WTI increased the past four weeks, the longest rising streak since July, as Arctic weather in the U.S. boosted energy demand. Last month was the coldest January since 1994 in the contiguous U.S. based on gas-weighted heating-degree days, according to Commodity Weather Group LLC.

Colder Weather

Crude also gained amid speculation that slowing jobs growth may prompt a halt in the reduction of economic stimulus. The Federal Reserve has been tapering bond purchases meant to boost the economy. The unemployment rate slid to 6.6 percent, the lowest level since October 2008, while payrolls climbed by 113,000 in January, Labor Department data show. The jobs figure was below the 180,000 median estimate in the Bloomberg survey.

“Energy markets saw the disappointing payrolls as good news in terms of what it may mean for tapering,” Mark Pervan, the head of commodity research at Australia & New Zealand Banking Group Ltd., said in an e-mailed note today.

Money managers boosted net-long wagers on WTI by 15,649 contracts, or 6 percent, to 275,931, in the week ended Feb. 4, according to the Commodity Futures Trading Commission. That’s the highest level since Sept. 17. Long positions advanced by 4,943, while shorts retreated by 10,706.

Hedge funds and other money managers cut net bullish bets on Brent crude to the lowest level in almost 15 months in the week ended Feb. 4, according to data from ICE Futures Europe. The reduction of 13,995 contracts, or 14 percent, reduces net- long positions to the lowest since Nov. 13, 2012.

WTI may extend its rally after settling above its 200-day moving average on Feb. 7 for the first time this year, data compiled by Bloomberg show. This indicator is at about $99.40 a barrel today. Investors typically buy contracts when prices climb above technical-resistance levels.

--With assistance from Ben Sharples in Melbourne. Editors: James Herron, Sharon Lindores