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Oil prices flat as IEA warns of output capacity limits

Reuters  |  LONDON 

By Christopher Johnson

LONDON (Reuters) - prices steadied on Thursday after sharp losses the previous session as the said the world's supply cushion "might be stretched to the limit" due to production losses.

Benchmark Brent rose $1.70, or more than 2.3 percent, to a high of $75.10 a barrel before losing almost all its gains to trade at $73.60, up 20 cents, by 1340 GMT. On Wednesday, Brent had slumped $5.46 or 6.9 percent.

U.S. light crude fell 30 cents to $70.08 a barrel, after losing 5 percent the previous session.

"Warnings from the IEA of a potential spare capacity crunch are helping the ... following yesterday's bloodbath," said Stephen Brennock,

An announcement by Libya's (NOC) that four were reopening, ending a standoff that had shut down most of Libya's oil output, was a key catalyst for a dramatic sell-off on Wednesday, analysts said.

The reopening will allow the return of up to 850,000 barrels per day of high-quality crude to international markets.

Two Libyan oilfields will reopen, NOC and industry sources said on Thursday, easing worries over supply from the key OPEC exporter that have helped prop up crude prices in recent weeks.

But supply concerns were highlighted again by the IEA, which reminded investors of the large number of output disruptions keeping pressure on global

"Rising production from countries and Russia, welcome though it is, comes at the expense of the world's spare capacity cushion, which might be stretched to the limit," the Paris-based agency said in its monthly report.

"This vulnerability currently underpins and seems likely to continue doing so," the IEA added.

Prices also found support from a U.S. stocks report showing U.S. crude inventories fell by nearly 13 million barrels last week, the most in nearly two years, reducing overall crude stocks to their lowest since February 2015.

The decline in U.S. inventories was partially due to a fall in stocks at the Cushing, delivery hub for U.S. crude futures, which dropped 2.1 million barrels. [EIA/S]

"For WTI (U.S. light crude) there is tightness at Cushing, which will be supportive over July and August," said Virendra Chauhan, at in

Supply to the U.S. market has also been squeezed by the loss of some Canadian

(Reporting by in Tokyo and in London; Editing by and Dale Hudson)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, July 12 2018. 19:28 IST