Oil market diverges as traders digest US inventories

8th January 2014, Comments 0 comments

Global oil prices diverged on Wednesday as traders digested the latest US crude inventories report and simmering tensions in Libya, analysts said.

New York's main contract West Texas Intermediate for February delivery fell 68 cents to $92.98 per barrel.

But Brent North crude rose 14 cents to stand at $107.49 a barrel in early afternoon London deals.

The US Energy Information Administration (EIA) said Wednesday that US crude inventories slid by 2.7 million barrels in the week to January 3, in the sixth successive weekly decline.

However, the decline was lower than that posted by industry body the American Petroleum Institute (API), which said Tuesday that inventories plunged 7.3 million barrels last week.

"Expectations had risen for another big drop in oil stocks" after the API numbers, said Forex.com analyst Fawad Razaqzada.

"However, this was not the case as the EIA's numbers ... showed a drawdown of only 2.7 million, suggesting feeble demand. As a result, WTI dropped sharply and broke below $93."

In contrast, Brent held in positive territory, continuing to win support from strong European economic numbers, and from supply tensions in Libya and elsewhere.

"Brent remained higher for a third successive session, boosted by some stronger-than-expected data from Europe and ongoing concerns over supply disruptions in the Middle East and North Africa regions," said Razaqzada.

The EIA added on Wednesday that US gasoline or petrol inventories increased by 6.2 million barrels last week, indicating weakening demand.

Distillates, including heating fuel, rose by 5.8 million barrels.

A record-breaking winter snap in the United States was meanwhile widely expected to support distillates demand this week.

US stockpile levels are keenly monitored by investors as it is an indicator of demand in the world's largest economy and the biggest oil consuming nation.

Elsewhere, Brent prices garnered further support from simmering tensions in Libya.

Self-rule activists in eastern Libya, who have been blockading key oil terminals for months, said Wednesday they would resume exports despite a government ban, raising the prospect of a confrontation with the navy.

The announcement by the head of the self-declared Cyrenaica regional government marked a sharp escalation of its standoff with Tripoli, which deployed the navy Sunday to prevent two tankers docking in the activist-held eastern port of Al-Sedra to take on crude.

"We announce our intention to trade in crude after the government failed to meet our demands," said Abd Rabou al-Barassi, who heads the executive bureau of the regional government, which Tripoli refuses to recognise.

The Libyan crisis saw oil output plunge to about 250,000 barrels per day from nearly 1.5 million bpd before.

But by Tuesday, output had risen to 546,000 bpd after production resumed at the Al-Sharara oilfields, which have a capacity of 330,000 bpd, according to figures released Wednesday.

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© 2014 AFP

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