Oil hits five-month high above $71 on Libyan supply threat

Supply has been volatile since the 2011 uprising against Muammar Qaddafi. Above, an oil facility in the northern Libyan town of Al-Buraqah. (AFP)
Updated 09 April 2019
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Oil hits five-month high above $71 on Libyan supply threat

  • Supply curbs led by the OPEC have underpinned a more than 30 percent rally this year for Brent crude
  • Libyan oil supply has been volatile since the 2011 uprising against Muammar Qaddafi

LONDON: Oil hit a five-month high above $71 a barrel on Tuesday, supported by concern that violence in Libya could further tighten supply already squeezed by OPEC cuts and US sanctions on Iran and Venezuela.
Supply curbs led by the Organization of the Petroleum Exporting Countries have underpinned a more than 30 percent rally this year for Brent crude, despite downward pressure from fears of an economic slowdown and weaker demand.
Brent, the global benchmark, rose to $71.34 a barrel, the highest since November, and by 0825 GMT was up 14 cents at $71.24.
US crude also hit a November 2018 high of $64.77 and was later up 22 cents at $64.62.
“Libya’s oil production and exports have not been jeopardized but the rise in tension is enough to send oil prices higher,” Tamas Varga of oil broker PVM said.
OPEC member Libya pumps around 1.1 million barrels per day (bpd), just over 1 percent of global oil output. Supply has been volatile since the 2011 uprising against Muammar Qaddafi.
“Concerns over the potential squeezing of supply in Libya following the escalation of violence there are adding fresh impetus,” analysts at JBC Energy wrote.
On Monday, a warplane attacked Tripoli’s only functioning airport as eastern forces advancing on the Libyan capital disregarded international appeals for a truce.
Yet despite generally bullish oil markets, concerns that an economic slowdown this year will hit fuel consumption have been preventing crude prices from rising even higher, traders said.
Recent increases in US crude inventories have also put a lid on price gains. US crude stocks are forecast to have risen by 2.5 million barrels last week, the third straight weekly addition.
The American Petroleum Institute, an industry group, issues its supply report at 2030 GMT, ahead of Wednesday’s official figures.
Looking ahead, a further rally in prices or downward trend in inventories could prompt OPEC and its partners to reconsider their production-cutting pact when they next meet in June.
Russia, a reluctant participant in the supply cuts, signaled on Monday it wanted to raise output when it meets with OPEC because of falling stockpiles.


‘Huge increase’ in crude prices not expected: IEA executive director

Updated 19 July 2019
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‘Huge increase’ in crude prices not expected: IEA executive director

  • The International Energy Agency is revising its 2019 global oil demand growth forecast down to 1.1 million barrels per day
  • IEA’s Fatih Birol: Serious political tensions could impact market dynamics

NEW DELHI: The International Energy Agency (IEA) doesn’t expect oil prices to rise significantly because demand is slowing and there is a glut in global crude markets, its executive director said on Friday.
“Prices are determined by the markets ... If we see the market today, we see that the demand is slowing down considerably,” said IEA’s Fatih Birol, in public comments made during a two-day energy conference in New Delhi.
The IEA is revising its 2019 global oil demand growth forecast down to 1.1 million barrels per day (bpd) and may cut it again if the global economy and especially China shows further weakness, Birol told Reuters in an interview on Thursday.
Last year, the IEA predicted that 2019 oil demand would grow by 1.5 million bpd. But in June this year it cut the growth forecast to 1.2 million bpd.
“Substantial amount of oil is coming from the United States, about 1.8 million barrels per day, plus oil from Iraq, Brazil and Libya,” Birol said.
Under normal circumstances, he said, he doesn’t expect a “huge increase” in crude oil prices. But Birol warned serious political tensions could yet impact market dynamics.
Crude oil prices rose nearly 2 percent on Friday after a US Navy ship destroyed an Iranian drone in the Strait of Hormuz, a major chokepoint for global crude flows.
Referring to India, Birol stressed the country could cut its imports, amid rising oil demand in the country, by increasing domestic local oil and gas production.
Prime Minister Narendra Modi had set a target in 2015 to cut India’s dependence on oil imports to two-thirds of consumption by 2022, and half by 2030. But rising demand and low domestic production have pushed imports to 84 percent of total needs in the last five years, government data shows.
Meanwhile, the IEA doesn’t expect a global push toward environmentally friendly electric vehicles can dent crude demand significantly, Birol said, as the main driver of crude demand globally has been petrochemicals, not cars.
He said the impact of a serious electric vehicle adoption push by the Indian government would not be felt immediately.