(For Bloomberg fair value curves, see CFVL <GO>)
April 7 (Bloomberg) -- Brent crude fell for the first time in three days after Libyan rebels agreed to reopen two oil ports, signaling a recovery in exports from the OPEC nation. West Texas Intermediate also declined.
Brent futures slid as much as 1.4 percent in London, extending a 1.3 percent loss last week. Barqa federalists will hand over the terminals of Hariga and Zueitina in Libya’s east “immediately” and two others, Es Sider and Ras Lanuf, in two to four weeks, Justice Minister Salah Al-Mirghani said yesterday. Hedge funds boosted bullish wagers on WTI by the most since February, betting that refineries may need more crude to expand gasoline output before the peak U.S. summer driving season.
“Libya may take a little longer, but it will come back,” said Hakan Kocayusufpasaoglu, chief investment officer at Archbridge Capital AG, a Zug, Switzerland-based hedge fund. “The natural trend is that it should happen because there is too much of economic value at risk. Globally there’s a decent amount of supply, and so you would expect oil prices, especially in the medium term, to sink further.”
Brent for May settlement dropped as much as $1.47 to $105.25 a barrel on the London-based ICE Futures Europe exchange and was at $105.30 as of 1:10 p.m. local time. The volume of all futures traded was 52 percent higher than the 100-day average for the time of day. Prices are down 4.8 percent this year.
WTI for May delivery decreased as much as 89 cents, or 0.9 percent, to $100.25 a barrel in electronic trading on the New York Mercantile Exchange. The U.S. benchmark grade was at a discount of $5 to Brent on ICE, the smallest gap based on closing prices since Sept. 23.
Libya, the holder of Africa’s biggest crude reserves, has become the smallest producer in the 12-member Organization of Petroleum Exporting Countries as rebels seeking self-rule in the eastern region of Cyrenaica halted production and shipments. Output shrank to 250,000 barrels a day last month, compared with 1.4 million a year earlier, a Bloomberg News survey of producers and analysts shows.
Hariga port can handle 110,000 barrels a day of crude while the Zueitina facility can load 70,000 barrels, according to IHS Inc., a consultant. Es Sider, the nation’s largest oil terminal, has a daily capacity of 340,000 barrels and Ras Lanuf has 220,000 barrels.
BNP Paribas SA and Commerzbank AG said it was too early to assume the agreement would result in the resumption of Libyan exports. Even with the re-opening of terminals in the east, protests in the west of the country will continue to impede production, according to an e-mailed report by Commerzbank, which predicted that oil will rebound later this week.
“Given past experience, the odds are not favorable for a material resumption of Libyan oil supply,” Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas in London, said by e-mail.
OPEC may not need to reduce output when it meets to review its production target of 30 million barrels a day on June 11, Kuwaiti Oil Minister Ali al-Omair told reporters in Kuwait City. “Maybe the world demands don’t allow us to cut,” al-Omair said, adding that Kuwait is “not concerned” that Libya is set to restore exports.
Money managers increased net-long positions on WTI by 7,518 futures and options in the week through April 1, the U.S. Commodity Futures Trading Commission reported on April 4. Bets on rising prices were the most for this time of year since 2006.
WTI is approaching a bullish technical formation known as a “golden cross,” according to data compiled by Bloomberg. The 50-day moving average, at about $100.23 a barrel today, has narrowed a discount to the 200-day mean to 32 cents, the least since November. Investors typically buy contracts when a moving average climbs above a longer-term one.
--With assistance from Maher Chmaytelli in Dubai and Ben Sharples in Melbourne.