Oil extended gains after capping its best week in almost two months as an escalation of fighting in OPEC producer Libya overshadowed the biggest increase in US active rigs since May last year.
Futures gained as much as 0.7 percent on Friday in New York trading after rising 4.9 percent last week.
Libya’s internationally recognized government vowed to counterattack against forces loyal to strongman Khalifa Haftar that are trying to enter the capital Tripoli.
Photo: Reuters
Crude pared gains after Saudi Arabian Minister of Energy Khalid al-Falih said in a Bloomberg TV interview that oil markets are “moving in the right direction” and there is no need for the kingdom to deepen output curbs.
Crude has kept rallying after its best quarter in almost a decade on signs that OPEC and its allies would extend output cuts beyond June.
The escalation of the conflict in Libya, which last month pumped 1.1 million barrels a day, adds to risks to supply from Iran and Venezuela.
On the demand side, a US report last week showing better-than-expected hiring is the latest evidence that the global economy might not be as bad as previously feared.
“Supply disruptions in Libya are lifting prices at a time when appetite for risk assets is rising as concerns over global growth ease,” Kiwoom Securities Co commodities analyst Ahn Yea-ha said.
“Oil might be rising too quickly at the moment, but it’s hard to find any bearish signals,” she said before the comments by al-Falih.
Fighting on the outskirts of Tripoli showed no signs of abating despite appeals for calm by global powers and the UN. While the latest fighting is south of Tripoli — away from most of the main oil ports and fields — the risk of disruption rises the more inflamed the tensions get. Western Libya is home to the Zawiya oil terminal, the export point for crude pumped from the country’s largest field, further south at Sharara.
West Texas Intermediate for May delivery climbed US$0.27, or 0.4 percent, to US$63.35 a barrel on the New York Mercantile Exchange as of 8:08am yesterday in London. Prices rose 1.6 percent to settle at US$63.08 on Friday, the highest closing level since Nov. 5 last year.
Brent for June settlement yesterday advanced 0.3 percent to US$70.56 a barrel on the London-based ICE Futures Europe exchange. The contract added 1.4 percent to US$70.34 on Friday, taking its weekly gain to 2.9 percent. The global benchmark crude was at a premium of US$7.16 to West Texas Intermediate for the same month.
The structure of the futures market is reflecting supply uncertainty. West Texas Intermediate’s front-month prices yesterday rose to a premium, or “backwardation,” of as much as US$0.04 a barrel to the contract four months ahead. They then flipped back into a discount, or “contango.” A spot price that is higher than the forward price indicates tighter supply.
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