London: Brent crude oil held above $110 a barrel on Friday, heading for a weekly gain, boosted by a positive outlook for fuel demand in the United States, the world’s largest oil consumer, and reduced Libyan supply.
Oil gained this week after US crude stockpiles fell, while the US Federal Reserve’s decision to start winding down its bond buying programme supported the view that the world’s biggest economy is on the path to recovery.
US crude futures headed for a rise of more than 2% this week, while Brent crude was set for a weekly gain of around 1.5%. Brent’s premium to US oil was also on track to narrow for a third straight week.
Brent crude rose 20 cents to $110.49 a barrel by 1100 GMT, while US oil was at $98.83 a barrel, down 21 cents.
“The rise is related to the strength in the US economy, strong housing numbers this week and the Fed communication saying ‘We now can start tapering’, which is a sign of the US recovery showing strength,” said Bjarne Schieldrop, chief commodity analyst at SEB Bank.
In Libya, crude exports have dropped to 110,000 barrels per day (bpd), from over 1 million bpd in July. The OPEC producer is stepping up fuel imports as a mix of militias, tribesmen and civil servants demanding political rights or a greater share of Libya’s oil wealth have occupied several oilfields and ports.
“Libya probably will increase production in 2014, but stable production at 1.5 million bpd is not my expectation,” said SEB’s Schieldrop.
US demand
Prices were also supported by data from the American Petroleum Institute on Thursday which showed demand for petroleum products in the United States rose to the highest November level in six years. A larger than expected drawdown in crude stockpiles last week also underpinned prices.
Pressure on prices came from US data on Thursday that showed new filings for unemployment benefits unexpectedly rose.
Data also showed US home resales hit a near one-year low in November, though housing market fundamentals remained solid.
The market will look to the final reading of third quarter US GDP growth, due to be released at 1330 GMT, for a further indication of the strength of the US economy. A Reuters poll predicated the 3.6% annual growth figure to be unchanged.
Violence in South Sudan threatened to disrupt oil production in the two-year old nation, though officials in the country have said until now that output has not been affected.
“If the situation does not improve, the conflict could lead to disruptions in oil output, which currently stands at around 200,000 bpd,” analysts at Vienna-based consultancy JBC Energy wrote in a note.
China National Petroleum Company CNPET.UL, a leading oil investor in producer South Sudan, said on Friday it was evacuating oil workers to the capital, Juba. REUTERS
