UPDATE 4-Oil falls towards $108 on supply build, Libya

Wed Apr 30, 2014 6:44am EDT

Related Topics

* U.S. crude stocks expected to hit record 400 million barrels

* Events in Ukraine, Libya Iran watched

* Coming up: EIA weekly oil inventories; 1430 GMT (Adds latest on Ukraine, Reuters oil poll, updates prices)

By Simon Falush

LONDON April 30 (Reuters) - Oil fell towards $108 per barrel on Wednesday, pressured by an improving supply outlook with stocks in the United States expected to be at a record high and prospects for higher exports from Libya.

Analysts polled by Reuters expect U.S. crude stocks to have risen by 2.4 million barrels to 400 million barrels last week, the highest level since the U.S. Energy Information Administration started collecting data in 1982.

The EIA's weekly inventory data is due out at 1430 GMT.

Increasing supplies of crude from the United States and OPEC are expected to keep oil prices weak this year, barring further geopolitical shocks, a Reuters poll of analysts showed on Wednesday.

Brent crude for June delivery was down 62 cents to $108.36 per barrel at 1028 GMT after climbing 86 cents to $108.98 in the previous session.

June U.S. crude was down 94 cents at $100.34 per barrel, after falling as low as $100.10, heading for what could be its lowest close in four weeks. A day earlier, U.S. crude rose 44 cents to close at $101.28.

"Crude oil stocks in the U.S. are rising to their highest level in decades and that's weighing on the whole crude complex," said Bjarne Schieldrop, analyst at SEB in Oslo.

Schieldrop added that optimism about crude oil exports from Libya after ports re-opened in the North African country was a factor weighing on oil prices this week.

Libya's Zueitina oil port will load its first tanker of crude on May 1-3 since reopening after being closed for nearly 10 months due to protests, trading and shipping sources said.

Libya lifted force majeure on Zueitina on Monday, paving the way to restart exports from that eastern port as well.

"It's more to do with optimism about higher exports than actual volume so far as Zueitina only has capacity to export 70,000 barrels per day," Schieldrop said.

Developments in Ukraine and its confrontation with Russia were having a mixed impact on oil prices.

The threat of tighter sanctions limiting Russian exports has led to some risk premium, but economic sanctions on Russia are beginning to bite with the IMF saying that Russia is now "experiencing recession".

This will likely dent demand in one of the world's largest energy consumers and enable it to export more, Schieldrop at SEB said.

Data from the American Petroleum Institute on Tuesday also painted a sturdy supply picture in the United States, as it showed that oil inventories rose 3 million barrels last week, higher than an increase of 2.4 million forecast by analysts.

EIA data, however, is the industry standard and more closely watched.

Investors were also watching developments over Iran after the U.S. targeted a Chinese businessman and a Dubai-based entity for alleged offences related to violations of sanctions.

Also, a decision from the U.S. Federal Reserve is due at 1800 GMT over whether to reduce its monthly bond purchases, a move which some analysts say would put pressure on oil prices. (Reporting by Simon Falush; editing by Jason Neely)

FILED UNDER: