Brent dips, holds above $60 after Saudi price increases

Brent dipped on Wednesday but held above $60 a barrel, supported by a rise in Saudi crude prices and air strikes and militant raids on oil facilities in Libya.

In a move widely seen as showing Saudi Arabia’s confidence in a demand recovery, the OPEC kingpin raised official selling prices (OSPs) for its oil deliveries to Asia and the United States on Tuesday.

“This is a sign that prices have bottomed out because it means Saudi is confident in raising prices without being afraid of losing market share,” said Tony Nunan, a risk manager at Mitsubishi Corp in Tokyo.

In the past seven weeks, Brent crude LCOc1 has risen from a six-year low near $45 to hold above $60 a barrel, despite continued concern about global oversupply.

The April Brent contract was down 49 cents at $60.53 by 0405 ET, after rising 2.5 percent on Tuesday. U.S. crude futures CLc1 rose 23 cents to $50.75 a barrel, narrowing their discount to Brent to less than $10 a barrel.

Air strikes on oil terminals and an airport in Libya on Tuesday helped to underpin prices, further threatening supplies from the OPEC member that have been slashed by ongoing fighting between rival governments in the west and east of the country.

Islamist militants, who have gained ground during the turmoil, on Tuesday took over Libya’s Bahi oil station and the Mabrouk oilfield, after forces guarding the installations, which are empty of staff, were forced to retreat.

However, uncertainty about talks between major powers and Iran over its nuclear program capped oil price gains. Any sign of a lasting agreement between Tehran and six world powers, the so-called P5+1 group, could result in a flood of Iranian crude.

“We still have the big question mark over Iran. This month is the crunch time for P5+1 talks,” Nunan said.

Israeli Prime Minister Benjamin Netanyahu warned the United States on Tuesday it was negotiating a bad deal with Iran that could spark a “nuclear nightmare,” drawing a rebuke from President Barack Obama and exposing a deepening U.S.-Israeli rift.

Some traders are also looking to weekly U.S. government inventories data due later on Wednesday to provide direction. An industry report showed a smaller than expected build-up in U.S. commercial crude stocks last week. [API/S]

Data from the American Petroleum Institute on Tuesday showed U.S. crude stocks rose 2.9 million barrels last week versus analysts’ expectations of an increase of 4.2 million. Stocks at Cushing, Oklahoma, delivery point of the U.S. crude contract, rose 1.2 million barrels, the API said. [EIA/S]

Reuters

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