08/22/2011
by Claudia Assis and V. Phani Kumar-MarketWatch.com
Crude futures in New York advanced 2.3% Monday as traders switched their bets to the U.S. benchmark from its European counterpart, which traded lower as the regime of Libya's Col. Moammar Gadhafi appeared to be in its last throes. Light, sweet crude for September delivery added $1.86 to close up to $84.12 a barrel on the New York Mercantile Exchange. It traded as low as $81.13 a barrel, and as high as $84.67 earlier.
The September contract expired at the end of the floor trading session. October crude, the next front-month contract, settled at $84.42 a barrel, advancing $2.01.
Also weighing on oil was a pullback in the Dow Jones Industrial Average from its early run, while the U.S. dollar index made an attempt to firm up, said Darin Newsom, a senior analyst at Telvent DTN in Omaha.
With the Libyan crude expected to start flowing again at some point, investors were finding their way back to the Nymex-traded WTI and unwinding their long Brent bets, said Tom Bentz with BNP Paribas in New York.
Oil also rose amid hopes Federal Reserve Chairman Ben Bernanke, scheduled to speak at a gathering of central bankers on Friday in Jackson Hole, Wyo., will signal steps to prop up the U.S. economy.
Most analysts have stopped short of forecasting a full-blown third round of quantitative easing, though.
Sweet oil from Libya mainly fueled refineries in Southern Europe, and the six-month conflict had halted the country’s 1.3 million barrels a day in oil exports.
Brent for October delivery lost 26 cents, or 0.2%, to end at $108.36 a barrel on ICE Futures in London.
Analysts were quick to point out it could take a long time to restore Libyan output to its previous levels. Read more about expectations for Libya’s oil exports.
“It could take six to 12 months to bring crude-production levels up to over 1 million barrels per day,” wrote Jason Schenker, president of Prestige Economics, in a note.
“It is important to keep in mind that global demand for crude oil is rising, and while there can be a price dampening effect on crude-oil prices from a return of Libyan crude to the global market, it is not going to have a permanent effect,” he said.
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