Oil prices flat, bounce off lows on Libya supply questions

A view shows El Feel oil field near Murzuq, Libya, July 6, 2017. Picture taken July 6, 2017. REUTERS/Aidan Lewis

NEW YORK: Oil prices were flat on Monday, falling early on worries about Chinese demand but then recovering from session lows on questions about potential reductions in crude supply from Libya.

Libya’s National Oil Corp (NOC) said an investigation had been opened into recent security violations at Sharara oil field. The NOC did not specify whether the violations had affected output at the country’s largest field, which has been producing about 270,000 barrels a day.

Workers at Libya’s Zueitina export terminal threatened to block a tanker due to dock on Saturday unless demands for salary and overtime payments are met.

“It is back to the Libyan situation being the most important thing here,” said Bob Yawger, director of energy futures at Mizuho in New York. ”You have Libyan barrels off the market, so supply is not what it was at this time last week.”

Prices retraced all their losses, then see-sawed within a few cents of unchanged.

Global benchmark Brent crude futures were at US$51.73 a barrel by 11:21am EDT (1521 GMT), down 37 cents from Friday’s close. They touched a low of US$51.60 earlier in the session.

US West Texas Intermediate crude futures were trading at US$48.62, down 20 cents.

Oil futures reversed course as gains were seen across global markets with world stocks rising, recovering some of their poise after fears of a US-North Korea nuclear standoff drove them to the biggest weekly losses of 2017.

Efforts by the Organization of the Petroleum Exporting Countries and other oil producers to limit output have helped lift Brent past US$50 a barrel. A cutback from Libya could help improve the group’s compliance with the cuts.

The latest ICE exchange data showed investors last week raised net long holdings of the commodity by the highest amount this year.

This contrasts with more bearish bets placed in the US market, where investors cut net long US crude positions last week, according to the US Commodity Futures Trading Commission.

Rising production in Libya has added to the global crude glut. The Opec member country is exempt from the global deal to cut output and has been trying to regain pre-war production levels.

“The recovery in Libyan production has been the single largest factor driving global supply growth in the last few months,” oil analysts at Panmure Gordon wrote.

Oil prices fell earlier on news that refinery runs in China dropped in July.

Analysts said the drop was steeper than expected, exacerbating concerns that a glut of refined fuel products could weaken Chinese demand for oil. - Reuters