Crude oil prices rose to more than one-week high in London as supply disruptions in Iraq and Libya raised concerns.
According to the daily Markets stats from EGM Securities, Commodities gained overnight with oil prices underpinned by supply disruptions in Libya when an eastern military commander, Khalifa Haftar, blocked exports at ports under his control.
The company declared force majeure, which can allow Libya – home to Africa’s largest proven oil reserves – to legally suspend delivery contracts.
Elsewhere, Iraq momentarily halted operations at an oil field amid escalating public unrest. This lifted WTI crude futures to firmly above US$ 59.00/bbl and Brent crude towards the US$ 66.00/bbl level where they then met resistance and retraced some of the gains but still held on to gains of more than 1%.
Libya’s National Oil Corp. (NOC) declared a force majeure after the LNA ordered the blockade of ports in the eastern region which would see oil exports drop by 700,000 barrels per day (bpd) and a drop in production by 800,000 barrels per day. The NOC noted that only one port will stay open and sees the country’s oil output cut to 72,000 bpd from around 1.2 million bpd within several days if blockades persist.
A number of countries, those which are most influential within Libya, have agreed to a 9-page document; calling for a return to the politico process, refraining from military intervention, and adherance to the arms embargo.
Brent futures increased to more than $65 a barrel after Libya’s oil production almost ground to a halt as armed forces closed a critical pipeline, shuttering output from the nation’s biggest oil project. In fellow OPEC nation Iraq, escalating protests stopped work at a minor field on Sunday.
Oil has traded in an US$8-a-barrel range this year on supply risks.
The latest incidents mark the second time this month that the market has been jolted by supply fears in OPEC nations, coming within weeks of a tense exchange between the U.S. and Iran that imperiled the region’s energy exports.
While the dramas have roiled markets, with Brent swinging between a trading range of $8 a barrel, prices are now little changed with the end of last year. Supplies are continuing uninterrupted, and traders remain reassured by what the International Energy Agency calls a “solid base” of plentiful inventories and surging American shale-oil production.
“The amount of oil which is off is substantial, but right now the expectations are that it’s not going to last because it’s part of a negotiation process,” said Olivier Jakob, managing director at consultant Petromatrix GmbH in Zug, Switzerland. “We are in this situation where you have some supply concerns if one looks at protests in Iraq and the situation in Libya, but on the other hand the products are weak.”
Brent crude traded 35 cents higher at $65.20 a barrel on the ICE Futures Europe exchange as of 10:41 a.m. in London, having earlier climbed 1.8% to $66, the highest since Jan. 9. West Texas Intermediate futures rose 21 cents to $58.75 a barrel on the New York Mercantile Exchange.
Libya’s oil production will collapse to just 72,000 barrels per day once its storage tanks are full, according to state-run National Oil Corp., down from more than 1.2 million barrels per day on Saturday. That would be the lowest level since August 2011, data compiled by Bloomberg show.
Separately, security guards in Iraq seeking permanent employment contracts blocked access to the Al Ahdab oil field, prompting a production halt, according to an official who declined to be identified. The Badra field, which has an output of about 50,000 barrels a day, is also at risk of closure.
