Brent oil fell in London, narrowing its record premium to U.S. futures, as investors bet that Libyan production may recover after rebels entered the capital Tripoli in a push to force out leader Muammar Qaddafi. The European benchmark contract tumbled as much as 2.3 percent amid speculation Qaddafi’s regime is crumbling, while New York crude swung between gains and losses after a fourth week of declines. Libya’s output dropped to 100,000 barrels a day last month, a Bloomberg News survey showed. That’s less than 10 percent of the 1.59 million barrels the nation pumped in January, before the uprising that started in February. “The immediate reaction should be that you’ll see more crude come onto the market” from Libya, said Jonathan Barratt, a managing director of Commodity Broking Services Pty in Sydney, who predicts crude in New York will average $100 a barrel this year. “In a market that has already seen inventories pick-up, it’ll just add weight to weakness in the complex.” Brent oil for October settlement dropped as much as $2.47 to $106.15 a barrel on the London-based ICE Futures Europe exchange, and was at $106.28 at 1:58 p.m. Sydney time. The contract was at a premium of $23.97 to U.S. futures, compared with a record settlement of $26.21 on Aug. 19. Crude for October delivery, the most actively traded contract on the New York Mercantile Exchange, fell 12 cents to $82.29 a barrel in electronic trading. September futures, which expire today, gained 2 cents to $82.28. Front-month oil fell 3.7 percent last week, a fourth weekly decline. Prices have slumped 28 percent from their 2011 peak on May 2. U.S. Futures The October contract rose as much as 1.1 percent earlier today on speculation that further measures by the U.S. Federal Reserve to stimulate the economy will support demand for fuel in the world’s biggest crude consumer. Prices slumped last week after an Energy Department report showed U.S. oil inventories increased 4.23 million barrels to 354 million in the week ended Aug. 12. They were forecast to drop 500,000 barrels, according to a Bloomberg News survey of analysts. Hedge funds and other speculators cut wagers on rising crude prices by 0.1 percent to 142,769 in the week ended Aug. 16, according to data from the Commodity Futures Trading Commission’s Commitments of Traders report. London-traded crude advanced 19 percent in the first half of 2011 as an armed rebellion against Qaddafi disrupted the country’s supplies and prompted Saudi Arabia to push for increased output from the Organization of Petroleum Exporting Countries. Libyan rebels said they captured two of Qaddafi’s sons as they pushed into Tripoli. Brent is trading below its 200-day moving average, signaling a breach of technical support, according to data compiled by Bloomberg. This indicator is around $107.90 a barrel today. Prices tend to extend declines when chart-support levels are broken. To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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