Crude oil futures decline following Libya port deal

Both West Texas Intermediate and Brent crude benchmarks fell on Monday after a deal between rebels and Libyas central government paved the way for the reopening of four exports terminals. Losses however were capped by stronger demand outlook in the US after Fridays robust employment data, coupled with persistent geopolitical tensions between Russia and the West.

On the New York Mercantile Exchange, WTI crude for delivery in May traded at $100.75 per barrel at 6:58 GMT, down 0.39% on the day. Prices shifted in a daily range between $100.67 and $101.08 per barrel. The US contract jumped by 0.85% on Friday but settled the week 0.6% lower, the first decline in three weeks.

Meanwhile on the ICE, Brent futures for settlement in the same month slid 0.79% to $105.88 per barrel, having varied between days high and low of $106.40 and $105.75 per barrel respectively. The European crude benchmark rose by 0.5% on Friday but closed the week 1.3% lower. Brent traded at a premium of $5.13 to its US counterpart, down from Fridays settlement at $5.58. The gap narrowed to $5.17 on Wednesday, the smallest since October 2nd.

The self-declared Executive Office for Barqa, the rebel name of the eastern region of Cyrenaica, has agreed to hand over control of two of the four oil ports under its control to the central government immediately, bringing back online a capacity of around 180 000 barrels per day.

According to Sundays deal, Libyas Zueitina and Hariga ports will reopen immediately, while the larger ports, Ras Lanuf and Es Sider, will be surrendered within the next two to four weeks after more negotiations. Es Sider, the countrys largest port, has a daily capacity of 340 000 bpd, while Ras Lanuf can ship 220 000 barrels per day.

Rebel spokesman Ali Al-Hasy said, cited by Bloomberg, that the ports are in “very good shape” and should be able to operate in a week. Operations are expected to resume after pipelines are inspected. Libya, holder of Africa’s biggest crude reserves, produced an average of 1.4 million bpd before protests and blockages began last summer.

Analysts at ANZ said in a note, cited by CNBC: “Markets are likely to treat the news cautiously, with Libya still a way off from returning to its normal production levels of over 1 million bpd. Brents key support remained the uncertainty over Libyan supply.”

US demand outlook

Oil prices were pressured last week after a gauge of consumption in the US slid to the lowest in ten months. The Energy Information Administration reported that US refineries supplied 18.2 million barrels a day of fuel in the week ended March 28, the lowest since June.

However, robust employment data released by the Labor Department on Friday added to previous signs that the recent economic slowdown in the US due to inclement winter weather has been overcome.

US private job growth exceeded its pre-recession peak for the first time. Despite supporting Fed’s view to further cut its Quantitative Easing program, the data fanned positive sentiment for fuel demand in the world’s top consumer.

The Labor Department reported on Friday that private US employers added 192 000 jobs in March following an upward revised 188 000 jump in February. That raised the job count to 116.1 million, surpassing the January 2008 high of 116 million. Meanwhile, the unemployment rate held steady at 6.7%, albeit defying expectations for a drop to 6.6%, even as half a million of Americans entered the workforce.

The oil complex was also underpinned by simmering tensions between Russia and the West. Pro-Russian protesters gained control over state buildings in three eastern Ukrainian cities on Sunday. Kievs pro-European government accused Russian President Vladimir Putin of fueling separatist disorder.

The US and the European Union have imposed sanctions, which include asset freezes and visa bans, on individuals closely tied to President Putin and are threatening broader economic penalties, if Moscow continues its course.

Britain asked its European partners last week to continue with the preparation of economic sanctions against Russia as a large portion of Russian troops remained amassed near Moscow’s border to Ukraine.