* Libyan exports to hit 1.4 mln bpd in April
* China fuel price increase biggest in 33 months
* Coming Up: U.S. API weekly crude stocks; 2030 GMT
(Adds analyst comment, updates prices)
By Francis Kan
SINGAPORE, March 20 Brent crude fell below $125
a barrel on Tuesday as global supply concerns eased and a hike
in Chinese fuel prices sparked fears of lower energy demand in
the world's second-largest oil consumer.
Continued fears of supply disruptions in Iran were offset by
news that Libyan oil production would return to levels last seen
before the civil war in February, and data the day before which
showed Saudi Arabia boosted oil exports in January.
Adding to worries about potential demand destruction, China
said on Tuesday it was raising retail gasoline and diesel prices
by between 6 and 7 percent, the biggest increase in nearly three
"The move might sap demand growth. Higher prices tend to
discourage wasteful consumption," said Gordon Kwan, head of
energy research at Mirae Asset Management in Hong Kong.
However, any impact is expected to be muted as China's
economy continues to grow robustly, albeit at a slower pace.
Brent crude shed 90 cents to $124.81 a barrel by
0730 GMT, after settling 10 cents lower in the previous session.
U.S. crude was down 66 cents at $107.43. The
benchmark had gained more than $1 on Monday after Valero
announced it would shut down its 235,000 barrel per day (bpd)
Aruba refinery, further tightening regional supplies ahead of
the U.S. summer driving season.
The April contract expires at the end of Tuesday's session.
U.S. May crude was trading at $108.00, down 56 cents.
Exports from Saudi Arabia rose by 143,000 barrels per day
(bpd) in January as the world's leading crude seller increased
supplies to the United States while it has pledged to work
"individually" and with other Gulf countries to return oil
prices to "fair" levels.
"Coupled with increased production from other members, OPEC
should be able to offset a complete loss of Iran's exports, but
doing so would effectively push OPEC spare capacity to zero,"
analysts at Morgan Stanley said in a report on Tuesday.
Libya is also ramping up production as it plans to export
almost 1.4 million bpd of crude oil in April, exceeding
deliveries in February 2011 before the uprising that ousted
This boost in global supply has eased concerns about the
standoff between the West and Iran over Tehran's nuclear
programme that has lifted oil prices this year and kept oil
markets on edge.
Iran has agreed to a new round of talks with the West, but
Western sanctions aimed at curtailing Tehran's nuclear ambitions
have hit oil exports.
A potential loss of Iranian barrels has help underpin a 17
percent surge in crude prices this year, and could take the
market higher when sanctions are enforced on July 1.
Societe Generale raised its price forecasts for Brent crude
oil and U.S. West Texas Intermediate crude oil for 2012 and
2013, citing supply side issues such as tight crude stocks, low
OPEC spare capacity and strong non-OPEC supply disruption.
"In addition, both actual and potential supply disruptions
from Iran will be an important factor for the markets," analysts
at Socgen said in a note on Monday.
The bank raised its 2012 Brent price forecast to $127.37 a
barrel from $110. It also upped its WTI price to $117.15 per
barrel, from $103 earlier.
The hike in China's fuel prices, its second in just over
five weeks, was anticipated due to a spike in global crude
prices, but the increase was bigger than expected, analysts
However, most said they did not expect the move would choke
China last raised fuel prices in February, lifting gasoline
and diesel rates 3 to 4 percent to record highs.
The government, worried about inflation, has often postponed
raising prices in the past two years, meaning refiners often run
at a loss as they are unable to pass on any increases in crude
oil costs to consumers.
U.S. CRUDE STOCKS
U.S. commercial crude stockpiles are forecast to have
climbed last week on higher imports and lower refinery activity,
in line with seasonal patterns, a preliminary Reuters poll of
analysts showed on Monday.
The survey of five analysts before weekly industry and
government inventory reports for the week to March 16 produced
an average forecast of a 2.4-million-barrel increase.
(Additional reporting by Florence Tan; Editing by Ed Davies)