Oil rose on Thursday after industry data showed a surprise drop in U.S. crude inventories, while comments from an OPEC official about lower-than-expected U.S. shale production growth in 2020 also provided some support.
Prices, however, were capped by mixed signs for oil demand in China, the world’s biggest crude importer, as industrial output rose more slowly than expected in October, but oil refinery throughput hit the second-highest level ever.
Brent futures LCOc1 rose 39 cents, or 0.6 per cent, to 62.76 dollars per barrel by 0606 GMT, while U.S. West Texas Intermediate crude CLc1 gained 39 cents, or 0.7 per cent, to reach 57.51 dollars.
The Secretary General of the Organisation of the Petroleum Exporting Countries (OPEC) Mohammad Barkindo said on Wednesday that there would likely be downward revisions of supply going into 2020, especially from U. S. shale, adding that some U.S. shale oil firms see output growing by only 300,000-400,000 barrels per day (bpd).
While Barkindo’s comments supported oil prices, there is not a clear way for OPEC to forecast oil production outside the group, Howie Lee, an economist at Singapore’s OCBC bank said.
“I don’t see much changes in supply so prices are still trading within the same range from the start of November,” he said.
Barkindo’s comments were also in contrast with forecasts by the U.S. Energy Information Administration (EIA) on Wednesday that U.S. oil production is on course to hit new records this year and next.
The American Petroleum Institute reported on Wednesday an unexpected drop in crude stockpiles by 541,000 barrels in the week to Nov. 8, against analysts’ expectations of an increase of 1.6 million barrels. Gasoline and distillates inventories increased, the API data showed.
Official weekly EIA data is due at 11 a.m. EST (1600 GMT) on Thursday.
Both reports were delayed a day for the U.S. Veterans Day holiday on Monday.
OPEC and its allies, including Russia, meet on Dec. 5 and Dec. 6 to discuss output policy and production curbs of 1.2 million bpd that have been in place since January with the aim of supporting crude prices.
The pact runs to March 2020.
Barkindo said on Wednesday it was too early to say if further output cuts would be needed.
“They have made it quite clear that they are not reducing production further,” said OCBC’s Lee.
“What Saudi can do now is to urge compliance among members especially Iraq and Nigeria. If they can comply, then they can talk about cuts.”
edited by Abdullahi Mohammed/Sadiya Hamza
National Oil Corporation announces reopening of major Libyan oilfield
The state-owned National Oil Corporation (NOC) of Libya, on Monday, announced that El Feel oilfield has been reopened after it was closed by tribal leaders in January.
“NOC announces the resumption of oil production at El Feel oilfield on Sunday and confirms the lifting of force majeure on crude oil exports from the Sharara and El Feel fields starting Sunday and Monday respectively,’’ said a company statement.
Production at El Feel field will start at a capacity of 12,000 barrels per day, while the full capacity production is expected to be reached in 14 days, given the damage caused by the shutdown, the statement added.
NOC on Sunday announced the re-opening of Sharara oilfield, the largest in the country, saying its full capacity production was expected to be reached in 90 days.
Oilfields and ports of Libya were closed in January by tribal leaders in eastern Libya, who accuse the Tripoli-based UN-backed government of using oil revenues to support armed groups against the east-based army.
The NOC confirmed that closure of the oilfields and ports have caused losses of more than $5.2 billion so far.
Edited By: Abdulfatah Babatunde (NAN)
Oil markets see further gains after OPEC+ extends production curbs
The United States benchmark oil price traded above 40 dollars per barrel on Monday.
The first time it has done so since March, after major oil producers agreed to stick to their current output restrictions for one more month.
The Organisation of the Petroleum Exporting Countries in Vienna and a Russia-led group of aligned countries, known as OPEC+, decided on Saturday to keep in place an output cut of 9.7 million barrels per day (bpd) until the end of July.
The group had first decided upon this reduction in April, to prop up prices that were under pressure from the coronavirus crisis and the ensuing drop in demand for transport fuel and oil-based chemicals.
While OPEC+ has achieved their aim of reversing the price decline, analysts said on Monday that the current upward trend will not be sustainable.
Oil watchers at the Vienna consultancy JBC Energy pointed out that prices have been supported by massive oil imports into China, which could bring its buying down to normal levels soon as oil becomes more expensive.
On the supply side, some Libyan oil fields are set to restart production soon, while OPEC+ member Mexico opted out of Saturday’s extension deal.
“We cannot shake the feeling that, price-wise, this market has gotten a bit ahead of itself,’’ JBC Energy said in an analysis, predicting that prices will drop unless some other price-pushing factors appear.
Oil prices rise on OPEC+ cuts, record China imports
Oil climbed on Monday after major producers agreed to extend a deal on record output cuts to the end of July and as China’s crude imports hit an all-time high in May.
Brent crude was up 51 cents, or 1.2 per cent, at $42.81 per barrel, by 0628 GMT, while United States West Texas Intermediate (WTI) crude rose 32 cents, or 0.8 per cent, to $39.87 a barrel.
Both hit their highest since March 6 earlier in the session, at $43.41 and $40.44, respectively.
Brent has nearly doubled since the Organisation of the Petroleum Exporting Countries (OPEC), Russia and allies, collectively known as OPEC+, agreed in April to cut supply by 9.7 million barrels per day (bpd) during May-June to prop up prices that collapsed due to the coronavirus crisis.
But Howie Lee, Economist at Singapore bank OCBC, noted that the latest deal had fallen short of market hopes for a three-month extension of output cuts.
He said both benchmarks would require stronger bullish factors to propel prices back to where they were before March 6, when they crashed after OPEC and Russia initially failed to reach an agreement on supply cuts.
“It’s a big gap there; you need a strong conviction to go from $43 to pre-crash levels,’’ Lee said, referring to Brent being above $50 before the March crash.
Low prices have drawn Chinese buyers to boost imports.
The OPEC+ move to extend cuts to July is, however, expected to lead to a supply deficit by October, aiding prices in the longer run, OCBC’s Lee added.
Libya’s supply could also rise soon as two major oilfields have reopened after months of a blockade that shut off most of the country’s production.
“The potential return of Libyan output could also cause considerable challenges for the OPEC leadership,’’ said Helima Croft, Head of Global Commodity Strategy at RBC Capital Markets.
Even as oil prices recovered, they are still well below the costs of most United States shale producers, leading to shutdowns, layoffs and cost-cutting in the world’s largest producer.
The storm weakened to a tropical depression on Monday morning.
“OPEC+ faces a Catch-22 situation,’’ he said.
“The resumption of output … may moderate the pace of rebalancing of the oil market.’’
Edited By: Abdulfatah Babatunde (NAN)
Libya’s largest oil field reopened: National Oil Corporation
The state-owned National Oil Corporation (NOC) of Libya on Sunday said that Sharara oilfield, the largest in the country, has been reopened after it was closed by tribal leaders in January.
“NOC confirms the return of production at the Sharara oilfield south of the country, after lengthy negotiations by the NOC to reopen the Hamada valve, which had been illegally closed in January,” NOC said in a statement.
NOC said production will start at a capacity of 30,000 barrels per day, with the full capacity production expected within 90 days due to the damages resulted by shutdown.
“The Libyan economy has suffered enough from the illegal blockades, and we hope that the restart of production at the Sharara oilfield will be the first step to revive the Libyan oil and gas sector and prevent an economic collapse in Libya,” said NOC chairman Mustafa Sanalla.
Tribal leaders in eastern Libya closed oil ports and fields in January, accusing the Tripoli-based UN-backed government of using oil revenues to support armed groups against the eastern-based army.
The closure of the oilfields and ports have caused losses of more than 5.2 billion United States dollars so far, NOC confirmed.