European benchmark Brent's premium over Middle East marker Dubai crude fell to the lowest level in three months on Tuesday as Libya ramps up oil production and robust demand from Asia boosts values of Middle East grades.

The Brent/Dubai Exchange of Futures for Swaps (EFS) for November dropped 47 cents to $4.20 a barrel, the lowest level since it fell to $3.30 on June 27.

The fall in June came four days after the International Energy Agency (IEA) announced a coordinated release of emergency oil stockpiles to counter the disruption to Libyan crude exports.

Italy's Eni has restarted oil production in Libya as the group moves to consolidate its position as the dominant foreign oil operator in the country and bolster flagging volume.

Libya's civil war and a halt in the country's oil exports of about 1.3 million barrels per day (bpd) sent the front-month EFS to $9.20 on June 15, the highest intraday value since the spread reached a record of almost $12 in October 2004.

While the supply situation looked more lax in the Mediterranean with the return of some Libyan output and shrinking refining margins, Asian crude markets remained tight.

"Europe is collapsing," said a trader with a Europen trading firm. "With current prices of Middle East crude, everything seems cheap for Asian refiners."

Front-month Oman crude, another Middle East benchmark, was trading at premiums of almost $3 a barrel to Dubai quotes, the widest in at least two years, up from around $1.80 on Monday.

Participants who had built up positions based on expectations that Oman prices would decline had to reverse them in recent days, scrambling to cover shorts and boosting values. – Reuters