Oil rallies as IEA warns of output capacity limits
LONDON: Oil prices rallied on Thursday, recouping some ground following sharp losses the previous session after Libya said it would resume oil exports.
The rally received an extra boost from the International Energy Agency (IEA), which said the world’s oil supply cushion “might be stretched to the limit” due to production losses.
Benchmark Brent crude oil LCOC1 rose $1.66, or more than 2.2 per cent, to a high of $75.06 a barrel before easing back to trade around $74.80 by 08:15 GMT. On Wednesday, Brent had slumped $5.46 or 6.9 per cent. US light crude CLC1 gained 50 cents to $70.88 a barrel, after falling 5 per cent the previous session.
“The market fell out of bed yesterday as support failed (but was)... probably overdone to the downside,” said Robin Bieber, technical analyst at London brokerage PVM Oil Associates. “Sharp attempts to recover are to be expected.” An announcement by Libya’s National Oil Corp that four oil export terminals were reopening, ending a standoff that had shut down most of Libya’s oil output, was a key catalyst for the price fall on Wednesday, analysts said.
The reopening will allow the return of up to 850,000 barrels per day of high quality crude oil to international markets.
An escalating Us-china trade row also helped depress oil prices as it raised the prospect of faltering global growth and lower energy consumption, particularly in emerging markets.
But Thursday brought a more positive mood in the oil market as the IEA reminded investors of the large number of output disruptions keeping pressure on global oil supply and prices.
Prices also found support from a US stocks report showing US crude inventories fell by nearly 13 million barrels last week.
A pump jack lifts oil out of a well, during a sandstorm in Midland, Texas, US.