LONDON—Crude futures were down slightly in Europe as a lack of new threats to oil supplies in the Middle East and North Africa gave investors a reason to lock in profits.
Fierce fighting continued in Libya, with fresh reports of bombs falling on the oil town of Ras Lanuf. The amount of oil production shut down by the fighting has stabilized at around 1 million barrels a day, with few export cargoes getting out. However, reports that the Organization of Petroleum Exporting Countries was in discussion over whether to raise crude production helped cap any move upwards in prices. Saudi Arabia has already raised production in an attempt to replace Libya's lost exports.
"Libya's output has been pretty much discounted," said Andrey Kryuchenkov, oil market analyst at VTB Capital. Something extraordinary needs to happen for prices to move higher again, he added.
At middayt the front-month April Brent contract on London's ICE futures exchange was down 27 cents at $114.77 a barrel, after falling as low as $112.79 earlier. The front-month April contract on the New York Mercantile Exchange was trading 25 cents lower at $105.44 per barrel, up from an intraday low of $103.33 a barrel.
Unease over the prospect of the unrest in Libya spreading to other oil-producing countries in the region could be the catalyst for a fresh move upwards, analysts said.
"Although at present the loss in Libyan oil supply is in the region of 1 million barrels per day and is easily being replaced by the other OPEC members, the potential for larger, future oil disruptions is the key issue here," said London Capital Group in a note.
Protests have been seen in Algeria, Oman, Bahrain and Iran. Crucially, protests are scheduled in major oil producer Saudi Arabia on March 11 and 20 and will be closely watched by the market. However, most investors see a destabilization of the Saudi regime as highly unlikely given that it has the funds it needs to quickly raise social spending.
"What happens on Friday in Saudi Arabia will be decisive for speculators in crude oil," said Olivier Jakob, managing director of Swiss consultancy Petromatrix.
Given the market's continued focus on geopolitical tensions, U.S. inventory data from the American Petroleum Institute due later in the global day is unlikely to have much impact on prices, despite its role as a precursor for the more closely watched data from the U.S. Department of Energy, due Wednesday.
The report is expected to show a 400,000-barrel increase in crude supplies, according to a survey of analysts. Gasoline stocks are seen falling by 1.5 million barrels, while supplies of distillates, including heating oil and diesel, are expected to decline by 1.8 million barrels.
At midday, the ICE's gasoil contract for March delivery was $12.25 lower at $962.25 per metric ton, while Nymex gasoline for April delivery was down 41 points at $2.9998 per gallon.
