In early Asian trading on Monday, WTI crude jumped to a high of $59.77 a barrel before retreating, jumping as much as 2 percent, to trade around $59.25.
The intraday jump in oil prices was driven largely by news over the weekend in Libya that the pipeline from the country’s largest oil field had been shut down by protesters ahead of peace talks, potentially exacerbating supply disruptions.
Libya’s oil production has fallen by about 800,000 b/d from 1.17 million b/d since Khalifa Haftar, a military commander in the east, blocked exports from ports he controlled, according to the national oil company.
Protesters have turned off valves in the Hamada pipeline north of Sharara, which could lead to a gradual shutdown of the 300, 000-BPD field, according to people familiar with the situation.
Libya’s oil production has fallen by about 800,000 b/d from 1.17 million b/d since Khalifa Haftar, a military commander in the east, blocked exports from ports he controlled, according to a statement from the national oil company. Libya’s national oil company has declared force majeure, which will allow Libya to legally terminate oil delivery contracts. Libya has Africa’s largest proven oil reserves.
Haftar, who is preparing to attend an international conference in Berlin chaired by German chancellor Angela Merkel, will be under pressure to agree to a ceasefire in the civil war. Haftar’s forces have surrounded Tripoli, the Libyan capital, and he has so far refused to halt the offensive and reach a compromise.
A spokesman for Libya’s national oil company said production would be limited to 72, 000 barrels a day once the country’s tanks were full, compared with more than 1.2 million barrels a day on Saturday. That would be Libya’s lowest daily output since August 2011, according to data compiled by Bloomberg.
The rest will come from offshore fields and the Wafa field. The Sharara field is capable of producing 300,000 barrels a day and will stop production once the tanks are full, according to people familiar with the matter.
Open interest and volume fell by about 11,900 contracts and 151,600 contracts, respectively, on Wednesday, according to preliminary data from CME Group’s crude futures market.
U.S. WTI crude ended up 0.03 percent at $58.54 a barrel on Friday, down nearly 0.9 percent for the week. Brent closed up 0.4 percent at $64.85 a barrel on Friday, down about 0.2 percent for the week. The signing of a trade deal between the United States and China and the Senate passage of a deal between the United States and Canada supported risk sentiment, but oversupply concerns continued to drive oil prices lower for a second straight week.
The number of active U.S. oil RIGS rose 14 to 673 in the week ended January 17, the first increase in four weeks, according to data from U.S. oil services company Baker Hughes on Friday. At the same time last year, there were 852. According to the latest report from the US energy information administration, US crude oil production growth is expected to slow to 3 percent in 2021, the slowest pace since 2016. U.S. crude oil production, which was in decline at the time, jumped 18 percent in 2019 to a record 12.2 million BPD. U.S. crude oil production is expected to climb a further 9 percent to 13.3 million BPD in 2020.