Crude oil prices slumped on Monday over increasing concerns over prolonged coronavirus restrictions and the resumption of oil production by Libya’s National Oil Corporation (NOC) from certain fields and some exports of crude oil.
The oil company added that it will only restart production at safe fields and exports from safe ports.
The American headline crude, the WTI declined by about 5% to $39 per barrel while the Brent crude declined by 4.13% to $41.37 per barrel.
Oil traders are panicky over the potential hit on oil prices following higher output in Libya as it resumes production
NOC’s Chairman, Mustapha Sanalla, “Our main concern is to start production and exports taking into account the safety of workers and operations, as well as to prevent any attempts to politicize the national oil sector, which means that the NOC is doing its technical and non-political mission to resume operations in the safe areas and technical evaluation is underway in preparation for the start of production and exports.”
The company said the force majeure will be lifted from fields and ports that are free of the presence of paramilitary groups and mercenaries but remain in effect for those where there are still such groups, which will disrupt the work of NOC.
The head of the Libyan National Army, General Khalifa Haftar, whose troops, with assistance from other affiliated groups, shut Libya’s oil ports in January, announced the end of the blockade on Friday. This was on the same day, NOC’s Sanalla disclosed that the force majeure will only be lifted from facilities after they are demilitarized.
The blockade by the military had driven down the oil production in Libya to the current 100,000 barrels per day as against the 1.2 million barrel per day at the beginning of the year.
This latest development is likely to reverse the improvement in oil prices that followed the latest meeting of OPEC+, which gave a glimmer of hope for supply, if not demand.
Oil prices surge over China’s growing appetite for energy
British based contract ticked up by 0.3% to trade at $63.59 a barrel while the WTI futures edged near $60 a barrel.
Oil prices rallied high at the second trading session of the week as data from the world’s second-largest oil consumer’s (China) import growth picked up coupled with rising tensions in the Middle East after rebels from Yemen disclosed that they fired missiles on Saudi’s energy infrastructure.
At the time of writing this report, the British based contract ticked up by 0.3% to trade at $63.59 a barrel while the West Texas Intermediate futures edged near $60 a barrel.
The world’s second-largest economy recorded impressive gains for last month in yet another boost to China’s economic recovery as global demand gained momentum. Crude oil imports into China surged by 21% in March from a low base of comparison a year earlier.
Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics spoke on the parabolic of the energy market, as oil traders seem to be uninspired on the resurging COVID-19 virus;
“The oil market’s magnetic attraction to the $63 level should tell us much about the near-term outlook amid conflicting signal of new Covid waves coming to shore ahead of what should be a summer gasoline buying bonanza.
But overall, this is an oil market that feels completely uninspired outside of a few micro lurches here and there.
Still, positive comments on the US economy from Fed Chairman Powell help to reassure the outlook for oil demand, balancing concerns about the continued spread of Covid-19 in some regions.”
What to expect
Recent price actions suggest oil traders might hold the $60 a barrel baseline in the near term even if U.S Treasury yields surge while struggling to resolve with what form and fashion the next leg of the reflation trade will take.
Oil prices stay on course as Saudi’s Energy Minister reassures traders
British based oil contract traded at about $63 a barrel while the WTI futures were trading slightly below the $60 price level.
Crude oil prices remained relatively firm at the early hours of Friday’s trading session as oil traders digested Saudi Arabia’s defense of OPEC+ plans in raising output thereby capping gains.
At press time, the British based oil contract traded at about $63 a barrel while the West Texas Intermediate futures were trading slightly below the $60 price level.
Saudi energy minister Prince Abdulaziz bin Salman recently revealed that there were no pressing concerns of demand/supply dynamics changing gear amid the gradual boost in outputs in an interview aired on Thursday, adding that OPEC+ had all ammunition put in place to change course if necessary. OPEC+ will continue to meet monthly on reviewing the energy market supply dynamics.
Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics spoke on the prevailing market sentiment amid macros pointing to more oil supplies hitting the sensitive energy market and an upsurge in COVID-19 caseloads.
“Positioning is much cleaner, although the market remains directionally long oil. However, the sudden calm and drop in volatility have attracted passive investors back to the fray as the market structure around prompt spreads start to tighten and the dollar begins to roll over.
“Still, the conflicting signals around OPEC+ supply coming back to market amid spiking coronavirus case numbers in India plus parts of Canada as well as Tokyo backtracking into the lockdown Abyss, together with reports linking the UK’s Covid-19 vaccine workhorse to the higher frequency of blood clots, continues to hold the bulls at bay.”
What to expect: The most recent OPEC+ agreement on releasing barrels into such present demand was not out of place – suggesting the futuristic price of oil might range between the $60 -$70 price levels with production normalization vs current high excess production capacity taken into consideration.
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