Oil prices steady as Libyan output rebounds

[April 04, 2017]  By Christopher Johnson

LONDON (Reuters) - Oil prices steadied on Tuesday as a rebound in Libyan crude production balanced expectations of a draw in U.S. crude oil and product inventories.

Benchmark Brent crude oil was up 25 cents at $53.37 a barrel by 1055 GMT. U.S. light crude oil was 25 cents higher at $50.49 a barrel.

Both benchmarks recovered from four-month lows last week on expectations that the Organization of the Petroleum Exporting Countries would manage to tighten supply by cutting production under a deal agreed at the end of last year.

But global inventories remain stubbornly high and investors are betting that it will take many months for oil prices to respond convincingly to lower OPEC output.

"Libya's gain means oil market pain," said Tamas Varga, senior analyst at London brokerage PVM Oil Associates.

"Along with figures showing U.S. drillers added rigs for an 11th week in a row, the pullback in oil prices was spearheaded by a rebound in Libyan oil production."

Libya's crude output increased after state-owned National Oil Corp lifted a force majeure on loadings of Sharara oil from the Zawiya terminal in the west of the country, sources familiar with the matter told Reuters.

But demand is picking up ahead of summer in key markets, including the United States, where analysts forecast industry data this week will show a fall in oil inventories.

U.S. crude and oil product stocks probably fell last week after rising for two consecutive weeks, a Reuters survey showed.

A worker walks past oil pipes at a refinery in Wuhan, Hubei province March 23, 2012. REUTERS/Stringer/File Photo

The American Petroleum Institute will report inventory data at 4:30 p.m. EDT (2030 GMT) on Tuesday, while the U.S. Department of Energy's Energy Information Administration will announce official stocks figures on Wednesday at 10:30 a.m. EDT (1430 GMT).

U.S. light crude may drop to $49.62 a barrel as it failed to break resistance at $50.95, said Reuters commodities markets technical analyst Wang Tao. Brent crude may retrace back to $52.79 per barrel, he said.

UBS analyst Giovanni Staunovo said OPEC was taking longer than expected to tighten the oil market but recent data suggested the process was under way in earnest.

"We believe the implemented production cuts will trigger a material drawdown in OECD oil inventories and thus higher crude oil prices," Staunovo said. "We expect Brent oil prices to rise above $60 a barrel in three months."

(Additional reporting by Jane Chung in Seoul; editing by Jason Neely and David Evans)

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