Oil Rebounds Towards $109
Oil rebounded towards $109 a barrel on Tuesday a day after prospects of a return of Libyan supply prompted its biggest daily fall in nearly a month although investors showed muted response to more U.S. sanctions on Russia.
Libya's National Oil Corp (NOC) said on Monday it planned to lift force majeure from the eastern oil port of Zueitina, offering hope of a restart to exports at a second port after a deal with rebels.
June Brent crude were up 41 cents to $108.53 a barrel by 0759 GMT after a 1.4 percent drop on Monday. U.S. crude for June delivery added 35 cents to $101.19 a barrel after settling up 24 cents in the previous session.
"The prospect of Libyan supply coming back put pressure on prices, but after the sharp fall there's always likely to be a bounce back," said Michael Hewson, analyst at CMC Markets.
However, there remains uncertainty about a sustainable return of Libyan supply, with further violence hitting the north African nation on Tuesday.
A suicide bomber in a car killed at least two people and wounded two others at an army camp in the eastern city of Benghazi.
Political risks stemming from the East-West conflict over Ukraine also underpinned oil, although analysts do not expect sanctions to have a direct impact on Russian energy supply.
"It's very unlikely that any formal sanctions will extend to the crude oil or energy channels," Mark Keenan, head of Asia commodities research at Societe Generale (SGE.SG) said. "They rely too much on each other if you take Russia and Europe together."
Financial markets largely shrugged off fresh U.S. sanctions imposed on Russian firms and government officials on Monday, while the international oil business played it down, with traders and global companies forecasting "business as usual".
An escalation in tensions could strengthen Brent spreads in the third quarter, especially with the September-December spread currently low compared with previous years, Citibank analysts said in a note on Monday.
In the United States, investors may be priming for a further drop in crude stocks at Cushing, Oklahoma, which have touched a five-year low. New pipelines have diverted oil from the delivery point for West Texas Intermediate contracts to the Gulf Coast, although the total U.S. stockpiles are set to post a fresh high.
Brent's premium to WTI <CL-LCO1=R> narrowed by nearly $2 to $7.30 on Tuesday.
U.S. commercial crude stockpiles were forecast to have risen 1.9 million barrels last week, a preliminary Reuters poll of six analysts showed. Crude inventories hit 397.7 million barrels the previous week, the highest since records began over 30 years ago.
(By Simon Falush, Additional reporting by Florence Tan in Singapore; editing by Jason Neely)
