Oil prices climb as Libyan field halts production, geopolititical risk resurfaces
Oil has been struggling to regain the highs of January, as rising U.S. output challenges efforts by the OPEC and its allies to ease a supply glut. Surging production from Libya has also been a thorn for the oil market.Updated: Mar 05, 2018 12:34 IST
Oil prices climbed as geopolitical risk resurfaced, with a halt at Libya’s biggest crude field sparking speculation that supply will tighten and help reduce a global glut.
Futures in New York rose as much as 0.8% after a 3.6% decline last week. Production is said to have been halted at the Sharara oil field, the largest in the North African nation, on Sunday after protests disrupted output at another of the OPEC member’s deposits last month.
Oil has been struggling to regain the highs of January as rising US output challenges efforts by the Organization of Petroleum Exporting Countries and its allies to ease a supply glut. Surging production from Libya has also been a thorn for the oil market, with concern that further growth may take the country to a level that would test a pledge made to OPEC to help limit an oversupply.
“Oil prices are responding to the tightening of supply due to the Libyan production halt,” Takayuki Nogami, chief economist at state-backed Japan Oil, Gas & Metals National Corp., said by phone. “Geopolitical risks in Libya were thought to have declined but that turned out to be wrong. Even if the Sharara field starts production again, the risk of another halt remains.”
West Texas Intermediate for April delivery rose as much as 50 cents to $61.75 a barrel on the New York Mercantile Exchange and traded at $61.53 at 1:18pm. in Tokyo. The contract fell 3.6% last week, the first weekly decline in three weeks. Total volume traded was about 11% below the 100-day average.
Brent for May settlement added 27 cents to at $64.64 on the London-based ICE Futures Europe Exchange. Front-month futures slipped 4.4% last week. The global benchmark traded at a $3.29 premium to May WTI.
Libya has struggled to boost oil production amid the lingering effects of civil strife that erupted earlier in the decade. Though output has risen, it remains well below the 1.8 million barrels a day Libya pumped before the ouster and killing of former leader Muammar Qaddafi. The halt on Sunday resulted from the closing of a pipeline from Sharara to the Zawiya refinery, according to a person with knowledge of the matter.
While investors focus on Libya, in the U.S., oil explorers boosted the number of rigs drilling for crude to 800 for the first time in almost three years, according to Baker Hughes data released on Friday. Drillers have been accelerating exploration in an almost-unbroken streak since the beginning of November, vaulting American crude output to a record of more than 10 million barrels a day.