Oil rebounds to 1-week high on U.S. industrial production, loss in Libyan output

Brent led the rebound in oil prices from last weeks decline after the Federal Reserve reported that U.S. industrial production rose in September at the fastest pace since February, while output in Libya fell to the lowest in six weeks after operations at its western port of Zawia were halted.

On the New York Mercantile Exchange, WTI crude for delivery in December rose by 0.51% to $98.35 per barrel by 15:42 GMT. Prices surged to a session high of $98.80, the highest since October 22, while days low stood at $97.39 a barrel. The U.S. benchmark fell by nearly 3% last week, a sixth decline in seven.

Meanwhile on the ICE, Brent futures for settlement in December jumped by 1.86% to $108.92 per barrel by 15:43 GMT. The contract rose to a session high of $109.28 a barrel, the strongest level since October 23, while days low stood at $106.86 a barrel. The European benchmark fell by 2.7% last week, the most in a month, after it shed 0.8% in the preceding five-day period.

Oil prices rebounded on Monday after the Federal Reserve reported that U.S. industrial production rose by 0.6% in September, the most since February, exceeding both expectations and last month’s advance of 0.4%. The expansion however was based on utilities and increased output by mines as higher temperatures stoked electricity demand.

Manufacturing output managed to barely rise last month after the production of computer and electronic goods fell, indicating that business spending by the end of the third quarter eased. Output at factories inched up by 0.1% and August’s reading received a downward revision to 0.5%. Analysts surveyed by Bloomberg expected a 0.3% advance in September.

Automobile production rose by 2% in September but sharply underperformed August’s 5.2% increase. Output at factories was held back by a 0.5% contraction in the production of computer and electronic goods.

Overall, the industrial production’s expansion in September exceeded analysts’s projections after utilities rebounded 4.4% last month following five consecutive monthly declines. Mining output gained 0.2% but trailed August’s 0.6% advance.

Meanwhile, the Federal Reserve reported that the Capacity Utilization Rate, which measures the percentage of production capacity being utilized in U.S. mines, utilities and factories, rose to 78.3% from 77.9% in August, surpassing economists’ forecast for a jump to 78.0%. However, the reading was 1.9% below its long-run average.

Libya output

The oil market also drew support on renewed supply concerns after Mohamed Elharari, a spokesman for the state-run National Oil Corp., said for Bloomberg that production at Libya’s Sharara oil field fell almost 50% from 300 000 barrels per day. The African country holds the continents biggest crude reserves.

Meanwhile, Libyas crude oil exports fell to the lowest in six weeks after operations at its western port of Zawia were ceased at the weekend. According to Reuters calculations, the countrys outbound shipments have fallen to less than 250 000 barrels per day compared to a capacity of over 1.2 million bpd.

The oil market was also supported as disappointing U.S. pending home sales reinforced speculations that the Federal Reserve will likely refrain from tapering its monetary stimulus this year. The National Association of Realtors reported that the number of people who signed contracts to buy previously owned homes fell in September by the most since May 2010. U.S. pending home sales plunged 5.6% and confounded analysts’ projection for a 0.1% increase after falling by 1.6% in August.

According to a Bloomberg survey of 40 analysts conducted on October 17-18, the Fed will begin decelerating its monetary stimulus in March.

Market players will also be keeping a close watch on the outcome of a meeting between Iranian diplomats and their Western colleagues on October 30-31 before a second round of negotiations is held in Geneva early next month. A senior Iranian official said on Saturday that his country hasn’t halted its uranium enrichment network, contradicting a statement by another lawmaker earlier in the week. Any news of scaling back the enrichment program would pressure down oil prices as Iran is expected to use such steps as a way to negotiate lifting some of the U.S. sanctions which curbed the nation’s oil exports and battered its economy.