Oil prices fall as increased US drilling points to higher output

Soaring US output, as well as rising output in Canada and Brazil, is undermining efforts by the OPEC to curb supplies and bolster prices. (Reuters)
Updated 19 March 2018
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Oil prices fall as increased US drilling points to higher output

SINGAPORE: Oil prices fell on Monday as increased drilling in the United States pointed to more output, raising concerns about a return of oversupply.
US West Texas Intermediate (WTI) crude futures were at $62.02 a barrel at 0350 GMT, down 32 cents, or 0.5 percent, from their previous close.
Brent crude futures were at $65.85 per barrel, down 36 cents, or 0.5 percent.
Monday’s price falls in part reversed increases last Friday, which came on concerns over tensions in the Middle East.
On a simple supply versus demand basis, however, oil markets are facing the possibility of a renewed glut after being in a slight deficit for much of last year.
US drillers added four oil rigs in the week to March 16, bringing the total count to 800, the weekly Baker Hughes drilling report said on Friday.
“Surging US production will hamper exponential growth in crude oil prices,” Singapore-based brokerage Phillip Futures said on Monday.
The US rig count, an early indicator of future output, is much higher than a year ago as energy companies have boosted spending.
Thanks to the high drilling activity, US crude oil production has risen by more than a fifth since mid-2016, to 10.38 million barrels per day (bpd), pushing it past top exporter Saudi Arabia.
Only Russia produces more, at around 11 million bpd, although US output is expected to overtake Russia’s later this year as well.
Soaring US output, as well as rising output in Canada and Brazil, is undermining efforts by the Middle East dominated Organization of the Petroleum Exporting Countries (OPEC) to curb supplies and bolster prices.
Many analysts expect global oil markets to flip from slight undersupply in 2017 and early this year into oversupply later in 2018.
One risk to supplies, however, is Venezuela.
“Concerns that Venezuelan output is on the verge of collapse continue to swirl around the market,” ANZ bank said.
The International Energy Agency said last week that Venezuela, where an economic crisis has cut oil production by almost half since early 2005 to well below 2 million bpd, was “clearly vulnerable to an accelerated decline,” and that such a disruption could tip global markets into deficit despite soaring US output.
“We remain bearish on the future direction of its (Venezuela’s) oil sector, with production ... averaging 1.535 million bpd, down 379,000 bpd on average over the year,” BMI Research said.


Libya’s National Oil against paying ‘ransom’ to reopen El Sharara field

Updated 14 December 2018
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Libya’s National Oil against paying ‘ransom’ to reopen El Sharara field

  • Ransom payment would set dangerous precedent
  • NOC declared force majeure on exports on Monday

BENGHAZI: Libya’s state-owned National Oil Corp. (NOC) said it was against paying a ransom to an armed group that has halted crude production at the country’s largest oilfield.
“Any attempt to pay a ransom to the armed militia which shut down El Sharara (oilfield) would set a dangerous precedent that would threaten the recovery of the Libyan economy,” NOC Chairman Mustafa Sanalla said in a statement on the company’s website.
NOC on Monday declared force majeure on exports from the 315,000-barrels-per-day oilfield after it was seized at the weekend by a local militia group.
The nearby El-Feel oilfield, which uses the same power supply as El Sharara, was still producing normally, a spokesman for NOC said, without giving an output figure. The field usually pumps around 70,000 bpd.
Since 2013 Libya has faced a wave of blockages of oilfields and export terminals by armed groups and civilians trying to press the country’s weak state into concessions.
Officials have tended to end such action by paying off protesters who demand to be added to the public payroll.
At El Sharara, in southern Libya, a mix of state-paid guards, civilians and tribesmen have occupied the field, camping there since Saturday, protesters and oil workers said. The protesters work in shifts, with some going home at night.
NOC has evacuated some staff by plane, engineers at the oilfield said. A number of sub-stations away from the main field have been vacated and equipment removed.
The occupiers are divided, with members of the Petroleum Facilities Guard (PFG) indicating they would end the blockade in return for a quick cash payment, oil workers say. The PFG has demanded more men be added to the public payroll.
The tribesmen have asked for long-term development funds, which might take time.
Libya is run by two competing, weak governments. Armed groups, tribesmen and normal Libyans tend to vent their anger about high inflation and a lack of infrastructure on the NOC, which they see as a cash cow booking billions of dollars in oil and gas revenues annually.