Crude prices logged their third loss for week four on Friday, as analysts warned of a gloomier near term for the market after an unexpected surge in production in politically-liberated Libya added to concerns about demand.
New York-traded western Texas Intermediate, the indicator that is key U.S. crude prices, settled down just six cents, or 0.2%, on the day at $40.25 per barrel. For the, WTI lost 2.1% week.
London-traded crude that is Brent the international standard for oil, was down simply 10 cents, or 0.2%, at $41.84 by 2:45 PM ET (18:45 GMT). For the, Brent lost 3% week. Crude prices logged their third loss for week four on Friday.
Since final week’s OPEC+ meeting that more or less production that is reaffirmed till year-end, crude prices have been taken both means by mixed variables.
Lending support had been the notion of this output cuts that could balance the market better, helped further by supportive U.S. crude stockpile draws.
Weighing on the market was an comfort that is unexpected between warring factions in Libya that could bring up to 1 million barrels more to the market.
Libya’s National Oil Corp said this week it expects production to rise to around 260,000 barrels per day, or bpd, by next week, up from some 100,000 bpd before the blockade of its oil ports and oilfields lifted by forces aligned to renegade Khalifa that is general Haftar.
Analysts estimate now that total production that is libyan reach 550,000 bpd by the end of the year and almost 1 million bpd by mid-2021. All that for a country that did not export a barrel that is single January due to your civil war forced by Haftar. At its peak in 2008, Libya produced nearly 1.8 million bpd.
The shifting market characteristics could force OPEC back once again to the drawing board, to figure out things to do with all that unexpected supply that is new.
“We do not need the extra oil,” Marco Dunand, Mercuria’s co-founder and Chief Executive told Bloomberg in an meeting this week, referring to the larger output that is libyan.
Dunand said global oil stocks increased by 500,000 to 1 million bpd in September but may be drawn down by about 1 million bpd in the quarter that is fourth.
He added: “We see a amount that is fair of starting ships, into drifting storage, now. We are filling up both tankers as floating storage and onshore tanks in September. There has been a slow-down in the global rebalancing process.”
Standard Chartered (OTC:SCBFF) analyst Emily Ashford (NYSE:AINC), meanwhile, told a Bloomberg-hosted panel discussion that a possible collapse in the OPEC+ deal is the downside price risk that is biggest to the oil market.
Another problem noted by analysts at Bloomberg: Time spreads between front-month and nearby contracts signaling weakness that is further. The spreads involving the two nearest December contracts for both U.S. and worldwide crude that is standard have lately moved deeper into contango — meaning losses for those rolling such positions month after month.
Reports also emerged earlier this month that commodity traders were chartering more tankers to keep oil that is crude, sparking concern we could see something like a perform of this spring when billions of barrels of unsellable oil had to be dumped on tankers because onshore storage had been full. After the lockdowns ended, oil sales began improving but not for jet fuel, which continues to be the demand component that is worst of the lot.