LONDON, (Reuters) – Oil rose above $111 a barrel on Friday, extending gains from a 1-1/2 month low hit in the previous session, as Libya’s precarious security situation and lower North Sea production stoked supply fears.
Libya, Africa’s third-biggest producer and OPEC member, swiftly ramped up oil output after last year’s revolution, but an assault last week on the U.S. consulate heightened fears about the new government’s ability to impose its authority.
This is likely to delay the already-slow return of expatriate oil workers to the country.
Brent rose as high as $111.39 a barrel and was trading $1.30 higher at $111.33 at 9:49 a.m. EDT (1349 GMT). Brent hit a low of around $107 per barrel on Thursday, its weakest since August 3.
U.S. crude was up $1.21 at $93.63 a barrel. The October contract expired on Thursday at $91.87 a barrel.
“While focusing on supply risks generally does offer reason enough for recovering prices, the currently flagging global economy may take the wind out of the sails of any such movement,” said a Commerzbank research note.
Brent futures are down 5.3 percent so far this week, heading for their steepest drop since late June, after key exporter Saudi Arabia pledged to keep prices low, as the U.S. said it was considering a release of strategic reserves and as the still weak global economy kept demand subdued.
U.S. crude is also down about 6 percent for the week, poised for its biggest weekly drop in about four months.
Adding to the worries about supply disruptions, two more cargoes of North Sea Forties crude loading in October were delayed because of lower production.
Export delays in September and October have been the most significant since May’s loading program, when 11 Forties cargoes out of 19 originally planned were deferred, according to Reuters records based on information from trade sources.
The North Sea Forties crude is the most important of the four grades that form the Brent crude basket, and disruptions in its supply exert more influence on the benchmark’s prices.
The 200,000-bpd Buzzard field, the largest connected to the Forties pipeline, began a shutdown around September 5 that is expected to take 28 days. Traders said it was now expected to restart three to five days later than originally planned.
WEAK OUTLOOK
Unless there is an uptick in demand, analysts say the medium-term outlook for crude remains weak, as supplies are plentiful while the global economy struggles.
On Thursday, manufacturing reports from the euro zone, China and the United States showed factory activity remained lackluster, further evidence of sluggish global growth.
“As the much anticipated monetary stimulus programs are now more or less in place, the focus is shifting back towards economic data and key political milestones for the euro zone,” J.P. Morgan analysts said in a report.
“U.S. data has been mixed … the most recent Chinese trade and survey data also offers few signs of a turnaround. Next week the euro zone will likely return to focus, with Greece, Spain and France unveiling fiscal plans and budgets,” they added.