Oil headed for weekly loss on recovering Libyan output, US-Iran dialog

Oil prices made a slight advance on Friday but remained on track to post a second weekly decline in a row as recovering output in Libya eased global supply issues, even as Saudi Arabia is expected to offset curbed production by other group members. Diplomatic progress between the U.S. and Iran and a possible meeting of the countries leaders next week, coupled with fading fears of a U.S.-led military attack against Syria also pressured prices.

On the New York Mercantile Exchange, WTI crude for delivery in November rose by 0.01% on the day to $105.87 per barrel at 7:20 GMT. Prices ranged between days high and low of $105.94 and $105.43 a barrel respectively. Light, sweet crude fell by 1.9% on Thursday, a fourth daily loss in five, and trimmed its weekly decline to little over 2.4%.

Meanwhile on the ICE, Brent oil for delivery in November rose by 0.26% to to $109.04 per barrel at 7:19 GMT. Prices held in range between days high and low of $109.06 and $108.48 a barrel respectively. The European benchmark slipped 1.7% on Thursday, a fourth daily decline in five, and trimmed its weekly loss to 2.4% after plunging 3.6% in the preceding five-day period.

Oil prices continued to be pressured after data showed that Libyas output has recovered to 620 000 barrels per day following a drop to a tenth of the countrys capacity in the beginning of the month, while exports fell to 80 000 bpd. The African nation, which holds the continents biggest crude reserves, pumped out 1.6 million bpd before its civil war in 2011. This years high was hit at 1.4 million bpd in April. Ibrahim Al Awami, director of measurement at the country’s oil ministry, said by phone for Bloomberg yesterday that Libyan output is expected to rise to 800 000 barrels per day.

According to tanker tracker Oil Movements, OPEC will boost its crude exports by 1.4% as Saudi Arabia will increase its output, offsetting disruptions in other members production. OPEC, excluding Angola and Ecuador, will likely export 23.9 million barrels per day in the four weeks to October 5, up 320 000 bpd from the same period to September 7. In August, around 2.7 million barrels per day of oil output were lost amid outages in Libya, Nigeria, Sudan, Iraq and Iran.

Meanwhile, oils geopolitical premium continued to erode on receding tension in the Middle East, coupled with diplomatic progress between Iran and the U.S. The U.N. Security Council will decide next week how to enforce the U.S.-Russian plan to destroy Syrias chemical arsenal, a deal that was struck to avert a Western-nation military strike against the Middle Eastern country. Irans recently elected President Hassan Rohani said that he is ready to help facilitate dialog between the Syrian government and the opposition.

Ric Spooner, chief market analyst at CMC Markets in Sydney, said for Reuters: “The big driver of oil markets in the last day or two has been news that Libya has restored some production capacity. Also, the immediate Syrian risk has been unwound.”

Meanwhile, a possible meeting between Iran and U.S. leaders in New York next week also eased pressure global supplies. President Hassan Rohani, considered as more moderate compared to his predecessor, continued to show signs that Iran is seeking to improve its relations with the United States. Rohani said on September 18 in an interview aired on NBC that his country wont develop nuclear weapons and that he named a diplomat known as moderate as foreign minister and chief nuclear negotiator.