Oil falls for sixth day as supply fears mount
Oil falls for sixth day as supply fears mount
The falls come amid a rout in global share markets as inflation fears grip investors.
Brent futures were down 44 cents or 0.7 percent, at $64.37 a barrel by around 0700 GMT. On Thursday, Brent fell 1.1 percent to its lowest close since Dec. 20.
US West Texas Intermediate (WTI) crude was down 62 cents, or 1 percent, at $60.53 a barrel, having settled down 1 percent in the previous session at its lowest close since Jan. 2.
Both contracts have fallen more than 9 percent from this year’s high point in late January.
“Bets on further rising oil and metals prices, for example by hedge funds, have climbed to excessively bullish levels,” said Carsten Menke, commodities research analyst at Swiss Bank Julius Baer.
“We see oil prices dropping toward and below $60 per barrel,” he said.
OPEC member Iran on Thursday announced plans to increase production within the next four years by at least 700,000 barrels a day.
Meanwhile, the US Energy Information Administration (EIA) this week said crude production last week rose to a record high of 10.25 million barrels per day (bpd).
At that level, US production would overtake the current output in Saudi Arabia, the biggest producer in the Organization of the Petroleum Exporting Countries (OPEC).
OPEC and other producers, including Russia, have cut production since January 2017 to force down global inventories, but these cuts have been offset by rising US oil production.
China plans to launch its long-awaited crude oil futures contract on March 26, two sources familiar with the situation said on Friday, a move that will potentially shake up the pricing of the world’s largest commodity market.
The launch next month will mark the end of a push to create Asia’s first oil futures benchmark, which would give China more clout in pricing crude in the region and a share of the trillions of dollars in the oil futures trade.
Oil dividend could turn Libya into North Africa’s Norway
- Production has topped 1.2 million barrels per day
- Outlook improves following agreement with militias
LONDON: As Libyan oil production surges, the country has been noted for having some of the most important oil reserves in the world in terms of quality.
Middle East expert Fawaz Gerges, who is professor of international relations at the London School of Economics, told Arab News that the country had some of the most important oil reserves in the world in terms of quality.
“There is nothing to prevent it from becoming the Norway of North Africa,” he said, referring to the wealthy Scandinavian country that far outstrips the rest of Europe – apart from Russia – in terms of oil production.
With Libyan oil production growing there are hopes that the country’s goal of producing 1.6m barrels per day can be achieved by the early 2020s. Production has topped 1.2 million barrels per day sometimes this year.
The target is technically possible, and it would restore production to levels before the revolution that toppled Col. Muammar Qaddafi in 2011. According to the International Energy Agency, Libya holds Africa’s largest reserves at 48.4 billion barrels.
The country still faces huge obstacles, not least civil strife and political instability. But even so Libya’s National Oil Corporation (NOC) recently disclosed that oil and gas revenue in the first half of 2018 had reached $13.6 billion, more than for the whole of 2017.
A significant factor behind this performance has been the rise in the oil price. But there is more than that to the Libyan oil story, experts said.
In an interview with Arab News, Nicholas Fitzroy, Middle East analyst at the London-based Economist Intelligence Unit (EIU) said NOC had managed to reopen key oilfields by forging security deals with militias. This has paved the way for a marked increase in production over the last 12 to 18 months.
“There has been a skewing of production data,” said Fitzroy. “Early 2017 showed output of around 600,000bbl/d against about 1million bbl/d in early 2018. The upswing follows the resumption of production from some of the country largest oilfields as accords with militias have taken hold.”
A recent EIU paper said: “The implications for Libya’s economy are wide-reaching, given the vital importance of oil exports to both the current and fiscal accounts — oil makes up more than 90 percent of both government and export revenue.
“Even though further security-related disruptions are likely to weigh on production, Libya’s oil sector has shown a capacity to recover in a short space of time.”
Fitzroy was doubtful that the NOC target to raise production beyond pre-revolution levels of 1.6m bbl/d, let alone to 2.2m b/d by 2023, would be possible. He added that investors and foreign investment were desperately needed.
Fitzroy said: “Any gains they achieve from here will be much harder. Their oilfields need significant investment to boost production further. Also, there are frequent breakdowns in power supply, and the threat of disruption as rival militias try to control oil terminals or pipelines. This can lead to fighting, as happened in July (when 700,000bbl/d was lost at one point).”
Gerges described Libya as one of the richest countries in the world in terms of the ratio of resources to its population “(But) without a central government, without a constitutional agreement among the various stakeholders, no amount of money will help Libya to transition to a new peaceful order. Without peace and security, you can never really use the money effectively to modernize the country.”
The Libyan oil outlook has improved since mid 2016 following an agreement between powerful militia chief Khalifa Haftar and the NOC designed to keep oil running to export terminals via Libya’s pipeline network which is in reasonable shape, according to Fitzroy. The EIU was considering raising its 2018 forecast of an average of 915,000bbl/d, according to one of its reports this year.
Meanwhile, the focus is on political developments. Outside powers hope that Libya’s chaos will be eliminated by elections for a new, united, government to end the east-west split between Libya’s UN-backed Government of National Accord in Tripoli and a rival House of Representatives parliament in Tobruk. In May, talks in Paris hosted by French president Emmanuel Macron saw key Libyan leaders set December as the election date.
But according to a report this week by Petroleum Economist: “Preparations are lagging, and the surge of recent violence has seen UN envoy Ghassan Salame suggest that the election might be scrubbed.”
That would push targets for Libyan oil production, most of which is exported, even further into the future, said analysts at Thomson Reuters in London.