Oil rebounds above US$60 as rival Libyan force bombs ports

[LONDON] Oil rebounded by more than US$1 to above US$60 a barrel on Tuesday as fighting in Libya, stronger equity markets and firm demand helped Brent futures recover from the biggest one-day loss in a month.

Brent crude fell almost 5 per cent on Monday as traders refocused on rising global supplies, which pushed oil prices down more than 60 per cent between June and January.

Air strikes on Libyan oil ports by forces of a rival government that controls Tripoli renewed concerns over supplies from the Opec member, helping Brent recover to the US$60 level that has anchored prices since mid-February.

Oilfields and ports are increasingly a target in Libya's conflict, which pits two rival governments and their armed forces against each other, nearly four years after the uprising that ousted leader Muammar Gaddafi. Forces claiming allegiance to Islamic State have also targeted oilfields and pipelines.

Brent for April delivery traded US$1.34 higher at US$60.88 a barrel by 1113 GMT, having fallen more than US$3 on Monday.

US crude futures, also known as West Texas Intermediate or WTI, were up 75 cents at US$50.34 a barrel. The US benchmark's discount to Brent narrowed sharply on Monday, reversing after touching US$13.03, the widest since January 2014.

While analysts said the market remained well supplied, a stronger financial performance in Europe and Asia helped support prices.

European shares rose close to seven-year highs on better-than-expected German retail sales, while a resurgent yen knocked the US dollar index off an 11-year high, making commodities priced in the greenback slightly cheaper for holders of other currencies.

Stronger economic performance should increase demand for oil, which has already been boosted by the sharp drop in prices from above US$115 a barrel in June. "The low prices have helped demand, and that has supported the crude oil market," said Olivier Jakob of PetroMatrix.

Data showed China's January crude oil throughput climbed 0.6 per cent on last year to 9.27 million barrels per day.

Traders are also watching to see whether fast-growing US shale output can keep expanding after a 12th straight weekly decline in the number of rigs drilling in the United States.

Despite the slowing rig count, US production and output in the Middle East remain high. "Oversupply is still an issue, and this caps the upside potential of oil prices in this supply-driven market," ABN AMRO senior energy economist Hans van Cleef said in a note.

REUTERS