Oil rises on Libyan outages, EU data signals demand

By Jeanine Prezioso

NEW YORK (Reuters) - Brent crude oil rose by more than 1 percent on Monday, boosted by expectations for rising demand from positive European economic data, while supplies from Libya remained sharply curtailed.

Brent rose by nearly $2 per barrel, boosting its premium to U.S. oil to a one-week high.

Positive German manufacturing data fed expectations for increasing oil demand, while supplies remained tight as Libya failed to reach a deal with tribal leaders to end a blockade of several oil-exporting ports.

The closure of the Libyan oil ports is preventing export of several hundred thousand barrels per day (bpd) of high quality, light crude.

Brent futures for January rose $1.97 a barrel to a session high of $110.80. They were trading around $110.39 by 1:32 p.m. EST, (1832 GMT) up $1.56. The contract lost 2.5 percent last week.

U.S. crude futures rose by $1.04 to $97.64. Last week, U.S. crude was down 1 percent for the week.

Brent's premium to U.S. oil rose as high as $13.72 during the session and was last trading at $12.83 per barrel, up from $12.23 at settlement on Friday. Rising Brent prices drove U.S. ultra low-sulfur diesel futures and London gas oil futures near one-week highs. Heating oil rose by 3.14 cents to $3.0071 per gallon, after touching a high of $3.0376. Gas oil rose by $12.50 to $930.25 a ton, after reaching $937.75.

German manufacturing data showed an expansion in the private sector of Europe's largest economy.

"What really moved the market was the German manufacturing numbers," said Rich Ilczyszyn, chief market strategist and founder of iitrader.com LLC in Chicago. "The concept for traders here is a bit of a 'risk-on' trade."

Tight supplies from Libya are "definitely going to be weighing on the market," Ilczyszyn added.

Libyan port blockages, along with strikes by oil workers, civil servants, tribesmen and other protesters at oilfields across the desert country, have slashed its oil exports to around 110,000 bpd from more than 1 million in July.

The U.S. Energy Information Administration said oil output in the world's largest oil consumer will increase by 800,000 bpd every year until 2016, when it will total 9.5 million bpd, just below a 1970 record of 9.6 million bpd.

"The market's been anticipating that and that's why we have a premium in Brent over WTI," said Gene McGillian, analyst with Tradition Energy in Stamford, Connecticut.

Investors also awaited a U.S. Federal Reserve decision on how soon to end monetary stimulus when it meets on Tuesday and Wednesday to discuss policy.

The U.S. central bank has been buying $85 billion worth of bonds a month to free up cash reserves at banks and stimulate lending. Opinion is divided on whether it will taper its stimulus efforts this week or wait for early next year.

A cut in its stimulus would boost the dollar, weighing on most commodities, including oil.

Positive economic data intimating that the U.S. economy is recovering has weighed on oil prices since the market expects it to mean the Fed will move toward tapering its bond buying program, even as an improving economy means oil demand may grow.

(Additional reporting by Christopher Johnson in London and Manash Goswami in Singapore; Editing by Dale Hudson, Jason Neely, David Gregorio and Leslie Gevirtz)