Oil advanced for the first time in three days amid speculation that an escalating conflict in Libya may pare a global surplus that’s driven crude into a bear market.
Brent futures rose 1.3% in London. Fires have been extinguished at three of six tanks at Es Sider, Libya’s largest oil port, which were set ablaze after an attack by militants, said National Oil Corp. spokesman Mohamed Elharari. Algerian Energy Minister Youcef Yousfi called on the Organization of Petroleum Exporting Countries to cut output to boost prices, the Associated Press reported.
Oil plunged 46% this year, set for the biggest annual drop since 2008, as OPEC resisted supply cuts to defend market share in response to the highest U.S. production in three decades. Libya pumped 580,000 barrels a day in November, down from about 1.59 million at the end of 2010, according to data compiled by Bloomberg. Trading was below average amid Christmas and New Year holidays.
“The main development over Christmas has been the attack on the Es Sider terminal in Libya and the fire that followed on the tank farm,” Olivier Jakob, managing director at consultants Petromatrix GmbH, said by e-mail from Zug, Switzerland. “Libya can help Brent to stabilize.”
Brent for February settlement (NYMEX:SCG15) gained 78 cents to $60.23 a barrel on the London-based ICE Futures Europe exchange at 1 p.m. local time. The contract declined 79 cents to close at $59.45 on Dec. 26, capping a fifth weekly loss. The amount of trading was 61% below the 100-day average for the time of day.
West Texas Intermediate for February delivery (NYMEX:CLG15) increased as much as $1.01, or 1.8%, to $55.74 a barrel in electronic trading on the New York Mercantile Exchange. It slid $1.11 to $54.73 on Dec. 26. The U.S. benchmark traded at a discount of $4.78 a barrel to Brent on ICE.
Libya’s oil production slumped after a civil war that began in 2011 when dictator Muammar Qaddafi died after a 42-year rule. The tank fires started on Dec. 25 after the Petroleum Facilities Guard gave Islamist militias an ultimatum before air strikes and the rebels fought back with rockets.
The Es Sider facilities have a total storage capacity of 6.2 million barrels, according to National Oil Corp. Libya’s third-largest port of Ras Lanuf was also halted this month by fighting. The country pumped 352,000 a day on Dec. 25, Elharari said.
“The market has long been aware of the risks rising in Libya,” Kang Yoo Jin, a commodities analyst at Woori Investment & Securities Co. in Seoul, said by phone. “A recovery in oil prices is hard to expect when there’s a supply glut, while demand isn’t catching up.”
OPEC, which supplies about 40% of the world’s oil, needs to “intervene to correct the imbalance and cut production to bring up prices and defend the income of its member states,” Algeria’s Yousfi said, according to the AP.
The 12-member group decided at a Nov. 27 meeting to maintain its collective output quota at 30 million barrels a day. It pumped 30.56 million a day in November, exceeding that target for a sixth straight month, a Bloomberg survey of companies, producers and analysts shows.
Hedge funds and other financial traders pared overall bullish bets on Brent crude for the first time since before OPEC’s decision to maintain production levels triggered a collapse in oil prices.
Money managers curtailed net-long positions by 15% to 112,886 contracts in the week ended Dec. 23, according to ICE Futures Europe exchange. They had added to net-longs in the previous four weeks, increasing them in the week to Dec. 16 to the highest level since July, even as Brent fell below $60 a barrel for the first time since 2009.