An unexpected disruption in Libyan crude output is helping oil investors shrug off record U.S. stockpiles that have undermined voluntary supply curbs by other OPEC nations.
Libya’s output was said to fall to 560,000 barrels a day after a pipeline carrying crude from the Sharara field — its biggest — stopped operating. While clashes among rival armed groups in the nation have previously led to market disruptions, news of the latest decline is driving a 0.7 percent gain in New York oil futures after boosting them 1.3 percent on Tuesday. Prices are headed for two straight days of gains for the first time in more than a month.
The production drop in Libya, which was pumping 700,000 barrels a day before the pipeline halt, is at least temporarily easing concern that rising U.S. supply is countering the effect of curbs by the Organization of Petroleum Exporting Countries and its allies. U.S. industry data on Tuesday was said to show crude inventories climbed, while a government report Wednesday is forecast to show stockpiles expanded. Six OPEC nations have joined with non-member Oman to voice support for prolonging their cuts past June.
“The market has become quite accustomed to volatility when it comes to Libya and their production coming and going,” said David Lennox, a resource analyst at Fat Prophets in Sydney. “There are a number of headwinds to oil prices, including rising U.S. output and stockpiles.”
West Texas Intermediate for May delivery was at $48.72 a barrel on the New York Mercantile Exchange, up 35 cents, at 7:54 a.m. in London. Total volume traded was about 41 percent below the 100-day average. The contract gained 64 cents to $48.37 on Tuesday.
Brent for May settlement was 29 cents higher at $51.62 a barrel on the London-based ICE Futures Europe exchange. Prices climbed 58 cents, or 1.1 percent, to $51.33 on Tuesday. The global benchmark was at a premium of $2.92 to WTI.
Libya’s state-run National Oil Corp. was said to declare force majeure on loadings of Sharara crude from the Zawiya oil terminal and on loadings of Wafa field condensate from the Mellitah terminal. Force majeure is a legal status protecting a party from liability if it can’t fulfill a contract for reasons beyond its control.
Oil market news:
- U.S. crude stockpiles rose by 1.91 million barrels last week, the American Petroleum Institute was said to report Tuesday; Energy Information Administration data Wednesday is forecast to show inventories increased by 2 million barrels.
- OPEC is likely to extend its supply pact beyond June as crude inventories haven’t been falling as fast as expected, according to the world’s biggest independent oil trader.