WTI futures hover near 5-1/2-month low on rising U.S. inventories, Libya protests, Yellen comments support

West Texas Intermediate was mostly unchanged in early European trading hours, hovering near the lowest since the end of May as a private report showed U.S. crude oil stockpiles rose last week to the highest since June, an eight consecutive weekly gain. The American benchmark however drew support after Fed Vice Chairwoman and President Barack Obamas nominee to lead the U.S. Federal Reserve, Janet Yellen, backed Feds monetary easing program and said the central bank has more work to do to aid the economy. Brent rose to a two-week high. The oil market continued to draw support on ongoing protests in Libya and on comments by Israeli Prime Minister Benjamin Netanyahu regarding a possible deal between the U.S. and Iran.

On the New York Mercantile Exchange, WTI crude for delivery in December traded at $93.86 per barrel at 8:13 GMT, down 0.03% on the day. Prices held in a range between days high of $94.02 and low of $93.45, near Tuesdays 5-1/2-month low. The U.S. benchmark rose by 0.5% on Wednesday but extended its weekly decline to nearly 0.6% on Thursday.

Meanwhile on the ICE, Brent futures for settlement in January rose by 0.36% to $107.28 per barrel by 8:12 GMT. Prices surged to a two-week high of $107.36, while days low stood at $106.74 a barrel. The European benchmark rose by 1% on Wednesday and extended its weekly advance to nearly 2.2%.

Oil prices were pressured after the industry-funded American Petroleum Institute reported on Wednesday that U.S. crude oil supplies rose by 599 000 barrels last week, while inventories at Cushing, Oklahoma, the biggest U.S. storage hub and delivery point for NYMEX-traded contracts, jumped by 1.67 million barrels. Motor gasoline stockpiles slid by 1.67 million, data by API showed, while distillate fuel supplies jumped by 606 000 barrels.

APIs data however is considered as less reliable than EIAs statistics. According to a weekly Bloomberg survey of analysts, the Energy Information Administration will likely report that crude inventories rose by 800 000 barrels in the week ended November 8. Motor gasoline supplies are expected to have fallen by 900 000 barrels, while distillate fuel stockpiles probably fell by 1 million, the survey showed. The report is due to be released at 16:00 GMT on Thursday.

Yellen comments

The market however drew support after Janet Yellen, President Barack Obamas nominee to lead the U.S. Federal Reserve, said she thinks the central bank has more work to do to aid the economy, backing the current pace of Feds monthly bond purchases.

“Our country has come a long way since the dark days of the financial crisis, but we have farther to go. Likewise, I believe the Federal Reserve has made significant progress toward its goals, but has more work to do,” Yellen said.

She called last months 7.3% unemployment rate too high, noting the economy and labor market were performing short of their potential, while inflation remained well below Feds 2% target and provided room for easy money supply. Yellen will be holding a Senate committee hearing at 15:00 GMT on Thursday and will provide further information regarding Feds tapering timetable.

Earlier in the week, Federal Reserve Bank of Atlanta President Dennis Lockhart said in a statement he wouldn’t rule out a so-called tapering of Fed’s quantitative easing program at FOMC’s December 17-18 policy meeting. However, he added that inflation remained low and would want to see it moving toward the 2% target. He called for “continued strong stimulus” and said the central bank wants to see economic growth reach 3% or more, a faster pace than its long-term trend.

Meanwhile, Federal Reserve Bank of Minneapolis Narayana Kocherlakota shared Lockhart’s opinion and spoke even more strongly on the need for monetary stimulus. He said the central bank should continue with its aggressive action and not scale back the program to safeguard the economy and ensure its recovery. The Federal Reserve should do “whatever it takes” to bring the economy back to full employment quickly, he said.

Mark Keenan, head of commodities research in Asia at Societe Generale, commented for CNBC: “Commodities, including oil, will be very sensitive to any clues about when the tapering will take place. The market will be pretty focused on the tone of her address. Hopefully shell provide some reasonable clarity, so the market can return to supply and demand dynamics.”

Libya, Israel

The market was also underpinned by recurring protests in Libya, which kept the nations oil and gas production and export curbed. Mohamed Elharari, a spokesman for state-run National Oil Corp., said for Bloomberg yesterday that 300 protesters stopped a tanker from loading at the Hariga port, indicating the government continues to be unable to regain its grip.

Ibrahim Al Awami, the Libyan oil ministry’s head of measurement and inspection, said on Wednesday that protests kept the Zawiya refinery closed for more than a day, leaving its 120 000 bpd capacity offline. The port was later reopened after the demonstration had come to an end.

Meanwhile, other recent protests in Libya cut the country’s natural gas exports to Italy. Paolo Scaroni, chief executive at Italian oil and gas group Eni said production has fallen to 60% of capacity since the start of the year.

“It’s very much out of control… It’s getting worse… but I have reasons to be optimist on the future,” Paolo Scaroni said for BBC.

Libya, the holder of Africas biggest crude oil reserves, produced an average of 450 000 barrels of oil per day in October, down from 1.45 million bpd a year earlier, data by Bloomberg showed.

Also supporting prices, Israeli Prime Minister Benjamin Netanyahu warned on Wednesday that a “bad deal” with Iran on its nuclear programme could lead to war. This comes after recent diplomatic progress between Iran and Western world powers spurred hope for a breakthrough that can put an end to a decade-long deadlock and ease U.S. and E.U. sanctions on the Islamic republics oil exports, which removed 1 million bpd from global oil supply.

Iranian diplomats and their peers from the U.S., U.K., France, Russia, China and Germany failed to reach an agreement on the nation’s disputed nuclear program in Geneva last week. However, negotiations are set to resume on November 20. U.S. Secretary of State John Kerry said he hoped for an agreement over Iran’s nuclear program within months.