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Oil above $122, market monitors Libya conflict - Daily News Egypt

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Oil above $122, market monitors Libya conflict

LONDON: Oil bounced back above $122 on Wednesday, partly reversing a deep sell-off, as talks on Libya opened up divisions among foreign powers seeking a solution to violence that has racked the OPEC member. Wednesday’s gains followed a two-day sell off driven by comment from representatives of consumer countries that high prices had begun to …


LONDON: Oil bounced back above $122 on Wednesday, partly reversing a deep sell-off, as talks on Libya opened up divisions among foreign powers seeking a solution to violence that has racked the OPEC member.

Wednesday’s gains followed a two-day sell off driven by comment from representatives of consumer countries that high prices had begun to depress consumption and after Goldman Sachs said a rally, which took Brent to a two-and-a-half year high above $127 on Monday, looked overdone.

ICE Brent crude for May rose $1.20 to $122.12 a barrel by 1250 GMT, off a session high of $122.19. US crude for May delivery gained 51 cents to $106.76.

The U.S. contract’s 5.8 percent drop by close of business on Tuesday from Friday was the biggest two-day percentage loss since May 2010.

The mood was still cautious, traders and analysts said, as they sought to analyze a range of factors.

"There have been plenty of negative factors for oil in the last 48 hours," Ben Le Brun, Sydney-based analyst at CMC Markets said. "It’s probably not a bad thing as inflation is the biggest buzzword around the market."

Reports from representatives of consumer countries — the Paris-based International Energy Agency and the US government’s Energy Information Administration — both said on Tuesday that high oil prices were beginning to brake the pace of economic growth and erode demand for fuel.

The IEA nevertheless left its 2011 fuel demand growth forecast unchanged, as did the Organization of the Petroleum Exporting Countries. The EIA trimmed its prediction for 2012.

Evidence of possible demand attrition could emerge with the release of the EIA’s inventory report at 1430 GMT.

Industry data late on Tuesday showed US crude inventories unexpectedly rose last week and oil product stocks fell as US refinery use plunged.

Supplies ample

OPEC has repeatedly said there is more than enough oil in the market to meet demand.

Leading exporter Saudi Arabia has said it will pump extra crude if there is a need, but following a big increase in March, Saudi-based industry sources said the kingdom had reined in production.

A new blend the kingdom produced to compensate for barrels of light, easy-to-refine crude lost to Libyan unrest, has met a muted response from the market.

Violence in OPEC-member Libya has shut off most of its production, which reached around 1.6 million bpd before unrest began.

Oilfields controlled by rebels are pumping around 100,000 barrels per day (bpd), but only a "minimal amount" is being exported, a rebel spokesman said on Wednesday.

He was speaking in Qatar, where ministers attended talks on Libya’s future. Some participants were eager for air strikes against Moammar Qaddafi’s forces as they feared the conflict could settle into a bloody stalemate.

OPEC spare capacity should be enough to cope with such an outcome, provided the upheaval doesn’t embroil other producer nations. Saudi Arabia alone has more than 3 million bpd to spare.

The hitherto bullish Goldman Sachs said on Tuesday speculators had pushed prices ahead of fundamentals of supply and demand. –Additional reporting by Florence Tan and Seng Li Peng in Singapore

 

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