Oil Edges Above $102, Supply Risks Support

Oil edged higher above $102 a barrel on Monday with support from geopolitical tensions in Ukraine and Libya, although ample supply limited the rebound from last week’s 14-month low.

Libyan exports have risen in the past few weeks although a further recovery looks uncertain, analysts say. Rockets hit an airport in eastern Libya on Monday, a day after fire destroyed the terminal at Tripoli’s main airport.

Brent crude rose 13 cents to $102.42 a barrel by 1215 GMT. It hit a 14-month low of $101.07 on Aug. 19. U.S. crude was up 6 cents at $93.71 a barrel.

“Oil prices are likely to stabilise, so we no longer expect prices to slide any further,” said Carsten Fritsch, analyst at Commerzbank. “Risks to the oil supply are still considerable.”

Underlining the extent of the recent selling pressure, exchange data on Monday showed hedge funds and other big speculators, in the week to Aug. 19, cut their bets on rising Brent prices to the lowest in over two years.

Weak demand and healthy production have helped create a supply glut in the Atlantic Basin, pushing Brent into its longest contango since early 2011, Morgan Stanley said.

In a contango market, immediate supply is cheaper than oil for delivery later.

“We expect Brent to trade in a slightly lower range for much of the third quarter, barring any geopolitical escalation,” the bank’s analysts, led by Adam Longson, said in a note.

“Libyan supplies could trickle back, but maintenance and security issues should keep exports subdued.”

Libya raised its output to 612,000 barrels per day (bpd) as of last week. Still, that is far short of levels of about 1.4 million bpd pumped last year.

In Europe, Russian President Vladimir Putin will meet his Ukrainian counterpart Petro Poroshenko for the first time in months on Tuesday to try to reach a compromise on Ukraine.

Russia wants to send a second humanitarian aid convoy to eastern Ukraine in the near future, Foreign Minister Sergei Lavrov said on Monday after Kiev and the West criticised Moscow for sending the first without official permission.

The dollar index rose as the U.S. Federal Reserve prepared to lay the groundwork for the central bank’s first interest rate increase in nearly a decade.

A stronger dollar makes dollar-denominated commodities such as oil more expensive for holders of other currencies, and tends to weigh on prices.