WTI Heads for Weekly Gain as Discount to Brent Shrinks on Libya

Apr 11, 2014 7:55 am ET

(For Bloomberg fair value curves, see CFVL <GO>)

April 11 (Bloomberg) -- West Texas Intermediate headed for a weekly gain after the International Energy Agency said OPEC will need to pump more crude this year. The discount to Brent shrank after Libya signaled it’s ready to boost exports.

Futures were little changed in New York, poised to rise 2.1 percent this week. Brent’s premium to WTI earlier narrowed the least since September as Libya’s state-run National Oil Corp. lifted force majeure at its Hariga terminal after rebels handed it over to the government. OPEC’s 12 member nations, including Libya, will need to increase production in the second half of this year, according to the IEA.

“The return, or not, of Libya will be key,” Olivier Jakob, managing director of Switzerland-based researcher Petromatrix, said in a note.

WTI for May delivery was at $103.23 a barrel in electronic trading on the New York Mercantile Exchange, down 17 cents, at 12:42 p.m. London time. The volume of all futures traded was 11 percent above the 100-day average. Prices have advanced 4.9 percent this year.

Brent for May settlement dropped 24 cents to $107.22 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude was at a $4.07 premium to WTI.

The Organization of Petroleum Exporting Countries will need to pump more crude in the second half of the year to meet demand after its production plunged to a five-month low in March, the IEA said.

OPEC Supply

Supplies from OPEC “plummeted” by 890,000 barrels a day to 29.62 million barrels a day in March, the Paris-based IEA said today in its monthly oil market report. That’s below OPEC’s collective 30 million production target and means the group will have to boost output in the second half, it said.

“OPEC supply actually registered a steep drop in March from February highs, but this setback looks likely to be short- lived,” the IEA, an adviser to oil-consuming nations, said. “Prospects for OPEC output are also on the rise -- though not without considerable political risk.”

Libya, which is producing at about 10 percent of capacity, is set to raise oil shipments next week as the first of four ports seized by rebels reopens.

Libya’s NOC lifted force majeure on Hariga yesterday, according to a statement. Hariga can load 110,000 barrels of crude a day, according to the oil ministry. That’s 8.5 percent of Libya’s daily export capacity of 1.3 million barrels.

The lifting of export restrictions is “the strongest indication yet that a partial recovery in Libyan crude exports may be around the corner,” analysts at Vienna-based researcher JBC Energy GmbH said in a note.

Crude Inventories

OPEC will be able to boost supplies to meet demand in the third quarter of 30.5 million barrels a day, Abdalla El-Badri, the group’s secretary-general, said at the International Oil Summit in Paris today. Increased output will come from Iran, Iraq, Libya and excess capacity from Gulf nations, he said.

WTI may fall next week amid speculation that U.S. crude inventories will increase, a Bloomberg News survey shows. Fourteen of 29 analysts and traders, or 48 percent, forecast prices will drop through April 17 while eight respondents predicted a gain.

--With assistance from Winnie Zhu in Singapore, Heesu Lee in Seoul, Maher Chmaytelli in Dubai, Ben Sharples in Melbourne and Grant Smith in Paris.