Oil prices above $86 ahead of Europe debt talks

SINGAPORE (AP) — Oil prices rose slightly toward $87 a barrel Friday in Asia ahead of a summit this weekend where European leaders will try to agree on a plan to contain their region’s debt crisis.

Benchmark crude for December delivery was up 39 cents at $86.46 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract fell 22 cents to settle at $86.07 in New York on Thursday.

Brent crude was down 26 cents at $109.50 a barrel on the ICE Futures Exchange in London.

Europe’s leaders plan to meet Sunday and have scheduled another meeting for next week as differences emerged this week between Germany and France over how to protect European banks from the consequences of a possible default by the Greek government.

Crude has traded between $85 and $89 most of this week as traders await details of Europe’s debt plan.

Analysts were also mulling the impact of the death of former Libyan leader Moammar Gadhafi on the OPEC nation’s oil production and exports. Before fighting started in February, Libya produced about 1.6 million barrels a day, but violence quickly reduced output to a trickle.

The drop in supply helped push prices to near $115 a barrel in early May.

“Virtually all of the news emerging from Libya over the past six weeks has been positive on the production side,” J.P. Morgan said in a report. “The oil market is discounting a relatively rapid return of at least the first 700,000 barrels per day of production.”

Some analysts expect Libya’s damaged infrastructure and infighting among factions to delay a return to pre-war production levels.

“Serious security challenges persist in Libya that could hinder efforts to restore Libyan production fully,” Barclays Capital said in a report.

In other Nymex trading, heating oil rose 0.4 cents to $3.03 per gallon and gasoline futures were steady at $2.66 per gallon. Natural gas slid 2.5 cents to $3.61 per 1,000 cubic feet.

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