* Libyan crude oil exports fall sharply
* U.S. industrial output posts largest gain in 7 months
* Market focused on talks between Iran and world powers
* Coming up: API data at 4:30 p.m EDT on Tuesday
By Jeanine Prezioso
NEW YORK, Oct 28 Brent oil futures jumped 2.5
percent on Monday, the biggest gain in more than two weeks, as a
drop in Libyan oil exports revived supply concerns.
Oil production of OPEC-member Libya fell after new protests
over the weekend at its oil fields and ports, boosting the
European benchmark's premium over U.S. oil prices by nearly $2 a
Brent traded higher in heavy volume for much of the session
but added close to another $1 of gains in the last half hour of
trading as traders, who had bet on falling prices during the
day, bought contracts to cover positions ahead of the market
Brent for December delivery ended up $2.68 a barrel
higher at $109.61, snapping three days of losses. The contract
settled at the 15-day moving average after breaching the 100-
and 200-day moving averages of $108.72 and $108.39.
Brent trading volumes outpaced U.S. volumes by 55 percent,
according to Reuters data as the North Sea crude's premium to
U.S. West Texas Intermediate swelled to settle at
$10.93 a barrel.
U.S. crude settled 83 cents higher at $98.68 per
barrel, at the 200-day moving average.
Prices rose feverishly in the last half hour of trade.
Traders short Brent were selling off positions in case Libya cut
more oil production, prompting the late gains, said Rich
Ilczyszyn, chief market strategist and founder of iitrader.com
LLC in Chicago.
"We're getting to a key level here," he said. "If Brent
closes above $110, that will be trouble. We could go another
EYES ON LIBYA AGAIN
The market focused on reports that Libya's crude oil exports
fell to 90,000 barrels per day, compared with a capacity of more
than 1.25 million bpd.
The benchmark briefly pared some gains in afternoon trade
after news that oil exports from one Libyan port would resume
within a week, before pushing higher near the
Tripoli has been struggling to reach a deal with protesters
in the east to re-open its ports and oil facilities, which have
blocked exports from its largest terminals for the last three
months in the worst disruption since the civil war in 2011.
Oil prices were also lifted by an improved demand outlook
and the expectation for better refining margins after data
showed U.S. industrial production recorded its largest increase
in seven months in September.
"The fact that industrial output has picked up means demand
is actually strong for products and refining margins should pick
up. It means enduser demand is holding up," said Amrita Sen,
chief analyst at consultants Energy Aspects in London.
Investors will also keep an eye on a two-day meeting of
experts from Iran and six world powers on Wednesday. Sanctions
against Iran have kept some 1 million barrels of oil off the
market, underpinning oil prices.
U.S. oil prices would need to get back above $99.80, or the
23.6 retracement level on a Fibonacci chart, from the recent
high of $112.24 to last Thursday's four-month low of $95.95
before the market would be able to strengthen further to the
upside, said Brian LaRose, a technical analyst with United-ICAP
in Jersey City.
"I think you get above that $99.80 level and you have room
to run," he said. "If you don't get back above that, you'll have
a period of consolidation before we trade sideways and head
The market was also waiting on oil inventory data this week.
Industry group American Petroleum Institute will report data at
4:30 p.m. EDT (2030 GMT) on Tuesday. U.S. oil inventories likely
rose 3.2 million barrels last week while distillates and
gasoline fell 1 million barrels each, a Reuters poll showed.
The U.S. Energy Information Administration is expected to
report its weekly oil inventory data at 10:30 a.m. EDT (1430
GMT) on Wednesday.