Oil prices march higher
LONDON: Oil prices extended gains on Wednesday despite an increase in US crude inventories, lifted by Libyan supply disruptions and expectations of output cut being extended by the Organization of the Petroleum Exporting Countries (OPEC).
Front- month Brent crude futures rose 25 cents to $51.58 a barrel by 1217 GMT, while West Texas Intermediate (WTI) crude futures were up 22 cents at $48.59 a barrel.
Oil production from the western Libyan fields of Sharara and Wafa has been blocked by armed protesters, reducing output by some 250,000 barrels per day (bpd) and prompting the National Oil Corp. to declare force majeure on Tuesday.
“That ( Libya), along with the Iranian oil minister saying there is likely to be an extension to the production cut deal, helped crude oil rally overnight,” Greg McKenna, chief market strategist at futures brokerage AxiTrader, said.
OPEC member Libya was excluded from the cuts, agreed late last year, as the country’s oil sector suffered from the unrest that followed the toppling of Muammar Gaddafi in 2011.
Iranian Oil Minister Bijan Zanganeh said on Tuesday that the agreement between OPEC and other producers led by Russia to cut output by 1.8 million bpd in the first half of 2017 was likely to be extended.
The higher prices came despite US crude stocks rising by 1.9 million barrels to 535.5 million barrels. But fell at the Cushing hub, while gasoline and distillate stocks declined, the American Petroleum Institute (API) said.
As markets remain bloated halfway into the cuts, there is a broad expectation that the supply reductions will be prolonged into the second half.
The OPEC-led strategy to rebalance oil markets is not without controversy, however.
As OPEC and especially Saudi Arabia cut production, producers not participating in the accord have been quick to fill the supply gap and gain market share.
In the US in particular, shale oil drillers have seized the opportunity to ramp up output and exports.
As a result, China became the third-biggest overseas destination for US crude in 2016, according to EIA data, up from ninth position the previous year.