LONDON: Oil rose towards US$108 a barrel on Thursday, as caution prevailed on prospects for a solution to Libya's oil exports deadlock.
Brent crude for February delivery was 43 cents higher at US$107.58 per barrel at 0913 GMT, after settling 20 cents lower.
Brent prices fell as much as US$6 per barrel last week, after Libya said it would restart its key El Sharara oil field.
It is now producing around 650,000 barrels per day (bpd) of oil, of which 510,000 bpd is being exported, Oil Minister Abdelbari Arusi told Reuters on Wednesday.
This is well up from a trough below 100,000 barrels per day late last year but still around half of exports before protests paralysed the sector.
Analysts said expectation that exports would quickly surge back towards the 1.4 million barrels per day before strikes at oilfields began last July had evaporated due to escalating tensions between the Tripoli government and an armed grouping controlling three eastern oil ports.
"The market was too optimistic about developments in Libya and its clear that the conflict is far from resolved and it's not going in the right direction," said Bjarne Schieldrop, chief commodity analyst at SEB in Oslo.
Libya said Wednesday it will stop doing business with, and take to court, any foreign firms trying to buy oil from eastern ports seized by armed protesters.
The statement came after tension built this week with rebels inviting foreign firms to buy crude from them and the Libyan navy firing warning shots over a tanker it said was trying to load oil illegally.
US oil was up 27 cents at US$92.60. The contract shed US$1.34 to end at a six-week low on Wednesday as a large build in crude stockpiles at the contract's delivery point in Cushing, Oklahoma, weighed on the market.
While the Cushing stocks rose, total US crude stocks fell by 2.7 million barrels in the week to January 3, data from the US Energy Information Administration (EIA) showed.
Overall US crude inventories fell for the sixth straight week, totalling 33.5 million barrels for the period, the largest six-week drop since October 1990.
Still, the commercial stocks remain near historical highs due to growing US oil output.
Gains in Brent were limited by a stronger dollar, which hovered near a seven-week high against a basket of major currencies. A stronger dollar makes commodities priced in the greenback more expensive to holders of other currencies.
Investors will look to US non-farm payrolls on Friday for signs of continued recovery in the world's largest economy, which may bolster speculation over imminent cuts in the Federal Reserve's commodity-friendly stimulus programme.-- Reuters
