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Oil rises on supply worry, improving economy

London, July 2, 2013

Brent crude oil rose above $103 a barrel on Tuesday, up for a second day due to concerns about supply disruptions in the Middle East and Africa and a slightly improved economic outlook.

Brent crude futures for August delivery rose 35 cents to $103.35 a barrel by 1122 GMT after rising 0.8 per cent the previous day. US crude futures for August were up 41 cents to $98.40 per barrel after rising more than 1 percent on Monday.

Oil output in Libya has fallen by a third after protesters shut several oilfields and anti-government demonstrations in Egypt have raised concerns about the stability of the whole region.

Prices were also supported by data on Monday from the Institute for Supply Management that showed US manufacturing activity grew in June.

"It's a mixture of supply worries and general market sentiment with yesterday's ISM index in the US better than expected," said Carsten Fritsch, oil analyst at Commerzbank in Frankfurt.

The outlook for crude oil exports from South Sudan remained murky as a meeting of top officials from Juba and Khartoum failed to resolve a conflict.

Brent's premium to US crude widened slightly to about $5 a barrel after hitting a low of $4.75 on Monday, the narrowest since January 2011, as severe flooding disrupted Canadian oil supply to the United States.

Canada resumed on Monday operation at a part of a major pipeline in Alberta as weather improved.

Some analysts said the spread was too narrow and could widen again to cover costs to transport oil from Cushing, Oklahoma, the delivery point for WTI, to other parts of the United States.

The spread at "below $5 is too narrow, given rising US oil production and geopolitical risks," Fritsch said. "Oil transportation via rail is not economic anymore at current prices."

Brent's premium to WTI could widen towards $7-$10 a barrel before narrowing back to $5 at the end of the year when more pipeline capacities to transport crude from Cushing are available, he said.

Crude demand will also rise in the United States as BP Plc starts up a new crude distillation unit at its 413,000 bpd Whiting, Indiana, refinery.-Reuters




Tags: Oil | Supply |

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