Brent oil above $108 on Libya ports restart, Fed meeting

Economic data from the U.S. heightened speculation that the Fed may decrease its bond purchases as early as next week

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Brent crude held above $108 a barrel on Friday as traders eyed a restart of ports in eastern Libya while also looking ahead to next week’s Federal Reserve meeting for any changes to its massive stimulus program.

Upbeat economic data from the United States has heightened speculation that the Fed might start trimming its bond purchases as early as next week, a move that could strengthen the greenback and weigh on demand for dollar-denominated commodities such as oil.

But stronger data could also lead to higher fuel demand growth at the world’s largest oil consumer.

“The prospect for WTI is better than Brent,” Phillip Futures analyst Tan Chee Tat said.

January Brent crude had edged up 10 cents to $108.77 a barrel by 3:17 GMT, while U.S. crude futures for January delivery were at $97.52 a barrel, up 2 cents.

Brent slipped by more than 2 percent this week, the steepest weekly loss since late October, and its premium to West Texas
Intermediate (WTI) closed at $11.06 on Thursday, the narrowest in a month.

The Brent-WTI spread could narrow to below $10 by mid-January when pipelines start draining crude from WTI delivery point Cushing in Oklahoma, Phillip Futures’ Tan said.

Shell’s Houston-to-Houma pipeline and TransCanada’s southern leg of the Keystone XL will start operations over the next few weeks, while the Seaway Twin, to move crude from Cushing to Texas, is expected to start in the second quarter of 2014.

In Libya, the government is set to reopen three eastern ports on Sunday that could increase exports from the OPEC producer from the current 250,000 barrels per day (bpd).

Analysts were doubtful as to whether Libya could raise its output back to pre-protest levels of more than 1 million bpd as internal conflicts continued to threaten the nation's oil industry.

Traders are also watching the progress of nuclear talks between major powers and Iran which could lift sanctions on the OPEC producer’s oil exports and increase global supply.

The U.S. Congress may hold off on new sanctions over Iran's nuclear program, but existing ones remained in place, preventing a rise in oil exports.

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