Oil in Libya climbs by 4% amid IS attacks

Market Watch

Oil futures settled with a gain of more than 4% on Thursday, rebounding on the back of what analysts referred to as “oversold” conditions, as reports of attacks on Libyan oil terminals reminded the market of the risks to supplies in the Middle East.

Advances for oil came despite a hefty increase in weekly U.S. crude inventories. The natural-gas market, meanwhile, rose even as its own supply data revealed a smaller-than-expected weekly decline.

March West Texas Intermediate crude CLH6, +9.21%  jumped $1.18, or 4.2%, to settle at $29.53 a barrel on the New York Mercantile Exchange, after trading as high as $30.25. Moves for WTI came in fits and starts. It was trading around $28.57 before the supply data and fell initially in the wake, before surging after the Libya news.

March-dated Brent crude LCOH6, +9.68% the global oil benchmark, leapt $1.37, or 4.9%, to $29.25 a barrel on London’s ICE Futures exchange.

Both benchmarks had fallen to their lowest levels since 2003 on Wednesday.

Two issues provided support for oil Thursday, said Phil Flynn, senior market analyst at Price Futures Group. The increase in crude reported by the Energy Information Administration early Thursday was less than the American Petroleum Institute’s report released on Wednesday. In addition, there are reports of Libyan oil tanks on fire.

AFP reported Islamic State group attacked oil facilities in northern Libya in attempts to seize key export terminals.

The news “set back the expectations that Libya would be exporting more oil soon,” said Flynn.

But Tim Evans, chief market strategist at Long Leaf Trading Group, wasn’t convinced that the Libya news was the big reason for the oil-price climb. He said the amount of crude involved is “negligible with respect to global supplies.”

Instead, “risk aversion has declined across the full spectrum of markets,” he said. So “crude’s increase is consistent with the increases seen in other markets.” U.S. and European equities moved higher Thursday.

Still, the violence in Libya helped to offset what would otherwise be seen as bearish U.S. supply data.

The EIA reported that crude inventories rose by four million barrels for the week ended Jan. 15. That was lower than the 4.6 million-barrel climb reported by theAmerican Petroleum Institute on Wednesday, but analysts polled by Platts expected supplies to be up by a smaller 2.9 million barrels.

Also supportive for prices, oil production in the lower 48 states edged lower for the first time in seven weeks, “which is at least ‘less bearish’ for the extremely oversupplied global oil market and reason enough for some bears to book profits after the most recent price slide,” said Tyler Richey, co-editor of The 7:00’s Report.

Gasoline supplies climbed by 4.6 million barrels, while distillate stockpiles fell by one million barrels last week, according to the EIA.

On Nymex, reformulated gasoline blendstock for February RBH6, +4.71%  added 1.4 cents, or 1.3%, to $1.031 a gallon and February heating oil HOG6, +11.14%   rose 3.2 cents, or 3.7%, to 89.75 cents a gallon. Read: The cheapest places to buy gas, in one map

Overall, oil-market sentiment “remains bearish across the board despite a pop in crude-oil prices immediately following the data release,” said John Macaluso, an analyst at Tyche Capital Advisors, “This technical oversold rally should be sold into until fundamentals change.”

Meanwhile, natural-gas prices got a boost from overall strength in the energy-futures market. The February contract NGG16, -0.37%  added 2 cents, or 0.9%, to $2.138 per million British thermal units.

The EIA reported Thursday that supplies of the commodity fell by 178 billion cubic feet for the week ended Jan. 15. That was less than the decrease of between 183 billion cubic feet and 187 billion cubic feet expected by analysts polled by Platts.