Oil up on Libya; U.S. crude volatile before inventory data
NEW YORK (Reuters) - Oil rebounded on Tuesday from the previous session's tumble, lifted by fighting that threatened Libya's oilfields, although U.S. crude struggled to hold to gains due to record crude inventories.
Higher prices imposed by Saudi Arabia for its crude buyers in Asia, the U.S. and northwest Europe did not immediately boost benchmark Brent and U.S. oil futures, although some traders saw the move as supportive.
Brent jumped almost 3 percent, trading firmly above the $60-a-barrel support level, as rival Libyan forces carried out tit-for-tat air strikes on oil terminals and an airport, reviving fears over supplies from the OPEC member.
Brent had tumbled nearly 5 percent on Monday, its biggest loss in a month, on speculation that a quick nuclear deal between Iran and the West could ramp up Tehran oil exports that would add to global inventories.
U.S. crude pared much of Tuesday's early gains on worries that U.S. stockpiles had reached new all-time highs after an eighth straight week of builds.
The U.S. market was also under pressure from a spread play versus Brent as players bet on it to decline further before inventory data issued by the government-run Energy Information Administration (EIA) on Wednesday. Industry group American Petroleum Institute will run its own stockpile data at 4:30 p.m. EST on Tuesday, ahead of the EIA numbers.
Some said Saudi Arabia's higher official selling price (OSP) for crude did not immediately boost the futures markets because of the global glut in oil.
The Saudis had consistently cut their OSP earlier this year to defend market share amid the selloff that took the futures markets down by 60 percent between June and January.
"It may seem, at first, that this is the beginning of the end of the price war, but the OSP pricing was never really the transmission mechanism for Saudi output or price policy," said John Kilduff, partner at New York energy hedge fund Again Capital.
Saudi Arabia's oil output, he said, "has held steady" while the global market "remains oversupplied by a very large degree, with no signs of easing."
Brent's front-month contract was up $1.53 at $61.07 a barrel by 11:24 a.m. EST, having rallied more than $2 at one point.
Front-month U.S. crude rose by 38 cents to $49.97, after gaining more than $1 earlier.
Brent's premium to U.S. crude rose to above $11, from Monday's close of $9.95.
(Additional reporting by Robert Gibbons in New York, Libby George in London and Henning Gloystein in Singapore; Editing by David Evans, David Clarke and Meredith Mazzilli)