Oil markets look to potential disruption
Libyan production down by 800,000 barrels after oil ports and fields shut down
Oil prices could see prices going up in the short term with a disruption in supply after oil production in Libya was down by 800,000 barrels on Friday, analysts said.
On Friday, Brent traded on $64.85 and West Texas Intermediate (WTI) at $58.54, both down on the week with continued oversupply concerns and weak data coming out from China.
Geopolitical tensions, however, may take centre stage again this week after oil exports were blocked from ports in Libya along with oilfield closures. International peace talks are taking place in Berlin in an attempt to reach a settlement between conflicting Libyan factions.
Setting the tone
“While the Gulf region has dominated geopolitics to start the year, North Africa will set the tone this week. Reportedly half of Libya’s oil production has been shut in as political rivals seek to exert influence over pending negotiations to end hostilities,” said Edward Bell, commodity analyst at Emirates NBD.
“The country continues to endure political unrest that threatens the stability of supplies and exports. Hence, we assign a relatively low probability to Libya maintaining recent high production levels for most of 2020,” he added.
“Unlike the circumstances in the Gulf, the tensions in Libya are actually affecting physical markets thus allowing a price rally to have more solid footing,” he said.
Problem of plenty
On a more longterm look, Bell said that market oversupply remained a pressing challenge for markets even with geopolitical tensions
“Forecasts from the IEA and Opec highlighted a large gain for non-Opec suppliers this year — the IEA expecting 2.1 million barrels per day of supply growth — and limited room for Opec producers to increase production at any point this year.
Ole Hanson, head of commodity strategy at Saxo Bank, said Brent would likely find continued support in the low to high $60 price range.
“The short-term outlook points to rangebound trading between $63/barrel and $68/ barrel, barring any renewed threat to supplies from the Middle East and especially Libya.