Brent above $109 on Libya, WTI falls on U.S. stock build

Reuters

* Libya exports in focus as down to 10 pct of capacity

* Higher-than-expected oil build weighs on U.S. crude

* Investors await outcome of Fed policy meeting

* Coming up: FOMC statement at 1800 GMT

By David Sheppard

LONDON, Oct 30 (Reuters) - Brent edged higher above $109 abarrel on Wednesday as export disruptions in Libya cut suppliesto Europe and Asia, while the benchmark U.S. contract felltowards $97 after a bigger-than-expected increase in inventoriesin the United States.

The divergent courses of North American and internationaloil markets boosted Brent's premium over the U.S. benchmark tomore than $12 a barrel, with the heavily traded spread on courseto settle at its widest level since April.

The U.S. Energy Information Administration reported a sharp4.1 million barrel rise in crude stocks in the United States onWednesday.

Traders were also looking ahead to comments from a U.S.Federal Reserve policy meeting that ends later in the day, butany impact on oil prices may be limited. The U.S. central bankis widely expected to maintain its massive economic stimulusprogramme.

Brent crude for December delivery was up 16 cents at$109.17 a barrel by 1435 GMT, after falling 60 cents on Tuesday.It touched an intraday high of $109.64 on Wednesday.

U.S. crude, also known as West Texas Intermediate(WTI), was $1.14 lower at $97.06, having hit an intraday low of$97.01.

The Brent-WTI spread expanded to $12.09 a barreland briefly touched $12.34, its widest in a week. Brent-WTI hasnot settled above $12 a barrel since early April.

Brent was underpinned by a sharp drop in Libya's crude oilexports, which boosted the international benchmark by almost $3a barrel on Monday. Libya's exports have slumped to around90,000 barrels per day, less than 10 percent of capacity, asprotests have halted operations at ports and fields.

"There is no indication that Libya's oil supply willnormalise anytime soon," Commerzbank analyst Carsten Fritschsaid.

"The oil market is thus split in two at the moment: tightsupply in Europe versus ample supply in the United States.Against this backdrop the price differential between Brent andWTI should remain high for the time being."

Italian energy major Eni, the biggest foreignproducer in Africa, cut its production outlook for 2014 onWednesday due to supply cuts in Libya and Nigeria. It previouslyguided investors to expect output in line with last year's.

US OIL STOCKS

Weighing on U.S. oil futures, crude inventories in theUnited States rose by 4.1 million barrels in the week to Oct.25, statistics from the EIA showed on Wednesday, exceedinganalysts' expectations of a 2.2 million gain.

Crude stocks at the closely watched Cushing, Oklahomastorage hub, the delivery point of the U.S. crude oil futurecontract, rose by 2.2 million barrels, the EIA said.

The numbers largely confirmed similar builds reported lateon Tuesday by industry group the American Petroleum Institute.

FED IN FOCUS

A mixed bag of U.S. economic data over the last few days hasreinforced expectations the Fed will not reduce its $85 billionof monthly asset purchases until March at the earliest.

"If (the Fed) acts as expected and there is no change intheir position, it will likely support oil prices, but not causethem to be pushed up significantly," Tetsu Emori, a commoditiesfund manager at Astmax Investments, said.

The policy statement from the Federal Open Market Committee(FOMC) meeting is expected at 1800 GMT.

Investors will also keep an eye on a series of technical anddiplomatic meetings on Iran's nuclear programme, which couldpave the way for an easing of sanctions on Iranian oil exports.

Any increase in Iranian oil exports may take some time,however, while the U.S. Senate is debating fresh sanctions aimedat further curbs of Iran's oil sales, an influential senatorsaid.

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