Oil futures pull back from 30-month highs

SAN FRANCISCO (MarketWatch) — Crude-oil futures edged lower Tuesday, retreating from 30-month highs but getting some support as unrest in Libya and the Middle East continued to fuel supply fears.

Light, sweet crude for May delivery (CLK11 107.98, -0.49, -0.45%) dropped 13 cents, or 0.1%, to $108.34 a barrel on the New York Mercantile Exchange. The contract hit an intraday low of $107.50 a barrel.

Libya oil minister talks Gadhafi

In his first face-to-face interview following reports of his defection last week, Libyan Oil Minister Shukri Ghanem talks exclusively to Sam Dagher.

On Monday, May oil futures gained 0.5% to end at $108.47 a barrel, marking the highest settlement since Sept. 22, 2008.

Settling above $108 took prices “clearly over the resistance and they are overbought and doubtless are overextended here slightly,” analysts at Cameron Hanover said in a note to clients.

Nonetheless, it’s a bull market and oil could hit $112 to $114.75 and possibly challenge the record high of $147 hit in the summer of 2008, they said.

Oil trading on Nymex, however, moved in the opposite direction of Brent, the benchmark crude for Europe, which trades on ICE Futures in London.

Brent for May delivery added $1.16, or 1%, to $122.22 a barrel. Brent was feeling more deeply the effects of the latest from Libya, which included fighting for control of the key oil town of Brega and investors monitored an oil tanker due to load Libyan oil in a rebel-held port, according to news reports citing a shipping industry data provider.

Rebels opposing the regime of Col. Moammar Gadhafi have tried to retake the city of Brega, but on Tuesday were heavily bombarded by forces loyal to Gadhafi. Most of Libya’s sweet, light oil got exported to Europe.

The market gets bullish every time pro-Gadhafi troops get an advantage and conversely bearish when rebels gain the upper hand, said Tom Bentz, director of BNP Paribas Commodities Futures.

Investors are particularly keen on seeing whether the tanker would indeed load up, he added.

Details about the tanker and the deal, thought to be a shipment to be marketed through Qatar, were not available.

According to claims by people affiliated with the Provisional National Council in Benghazi, the tanker would be loading up about 1 million barrels of crude this week, and such claims are “probably correct,” analysts at Eurasia Group said in a note to clients Tuesday.

Rebels are putting out a “modest amount of production,” in the order of 100,000 to 120,000 barrels a day, from the Sarir, Mesla and Nafoora oil fields in eastern Libya, the analysts said.

“Some of this is being used for local refining needs, and the rest has been backing up in storage terminals, so it does appear that there is enough crude oil at Tobruk for this tanker loading .... Over the second quarter, though, this is likely to represent at best a trickle of exports, perhaps 50,000 (barrels per day), and fall well short of rebel claims to be able to load a one million-barrel cargo per week,” they added.

The Libyan government is prepared to negotiate reforms that could include elections or a referendum, but Gadhafi’s resignation is not an option, according to media reports that cited a government spokesman.

The developments came amid widespread unrest across North Africa and the Middle East, including demonstrations in Algeria and Yemen.

Oil prices have risen more than 18% since the beginning of the year.

Late Monday in the U.S., Federal Reserve Chairman Ben Bernanke said the recent rise in commodity prices did not present a major threat to inflation.

Bernanke told a Financial Markets conference in Atlanta that as long as inflation expectations remain stable and well anchored, “which in my view remains the case,” and as long as commodity-price increases eventually stabilize, then this will not be reflected in a standard increase in inflation. Read more on Ben Bernanke’s address.

China took steps to cool down its own inflationary pressure earlier Tuesday, raising rates and rekindling concerns about a slowdown in the world’s second-largest economy and avid consumer of commodities.

China’s central bank lifted its base lending and deposit rates a quarter of a percentage point Tuesday. Read more about China's interest-rate increase.

Also tinting crude’s trading were a drop for a key services-sector gauge, the proposed budget plan presented by House Republicans, and the minutes of the latest U.S. Federal Reserve meeting, which showed the central bank divided over when to pull the plug on its loose monetary policy. Read more about the March minutes.

The Institute for Supply Management’s services-sector index for March fell to 57.3% from 59.7% in February, the private group reported Tuesday. Economists surveyed by MarketWatch expected the ISM services index to come in at 59%. See more about the ISM service-sector data.

Meanwhile, the House Republicans’ plan would shrink government spending by $6.2 trillion in 10 years. It is expected to face fierce opposition. Read more about the proposed spending cuts.

Investors also awaited the first peek at oil inventories. The American Petroleum Institute showed a surprise decline for crude inventories for the week ended April 1.

The API late Tuesday said supplies declined 2.8 million barrels. The trade group also reported gasoline stocks up 568,000 barrels and stocks of distillates, which include heating oil and diesel, down 1 million barrels.

The data preceded the more closely watched, official data from the Department of Energy, scheduled for 10:30 a.m. Eastern on Wednesday.

Analysts polled by Platts expect the data to show crude-oil inventories up by 1.3 million barrels for the week ended April 1. Gasoline stocks are seen declining by 2.1 million barrels, while stocks of distillates, which include heating oil and diesel, are expected to rise 600,000 barrels.

Among other energy products, gasoline for May delivery (RBK11 3.18, -0.02, -0.56%) added 3 cents, or 1%, to $3.20 a gallon.

May heating oil (HOK11 3.17, -0.02, -0.47%) advanced 1 cent to reach $3.19 a gallon.

Natural gas for May delivery (NGK11 4.22, -0.01, -0.17%) lost 6 cent, or 1.4%, to $4.23 per million British thermal units. The DOE releases data on natural-gas inventories on Thursday.

Cocoa lower; conflicting Ivory Coast news

Reports that the Ivory Coast’s embattled president had agreed to step down sent cocoa futures to a 1.5% loss on the day.

The Ivory Coast, a top exporter of cocoa, has been engulfed by a bloody political standoff between incumbent president Laurent Gbagbo and election winner Alassane Ouattara.

Reuters earlier reported Gbagbo was negotiating his exit, but later Tuesday the Associated Press quoted him as saying he was not stepping down.

Cocoa for May delivery settled $45 lower at $2,975 a metric ton on the ICE Futures Exchange in New York.

(Source: http://www.marketwatch.com/story/oil-futures-pull-back-from-30-month-highs-2011-04-05?pagenumber=2)