Oil Falls to 1-Month Low as Nigeria, Libya Poised to Swell Glut

  • U.S. drillers continue their expansion with rising rig count
  • Gasoline gains on delayed start of Colonial Pipeline’s Line 1

Oil fell to a one-month low in New York on speculation that the resumption of shipments from Libya and Nigeria may add to the global surplus.

Futures dropped 2 percent. Libya and Nigeria, whose supplies have been reduced by domestic conflicts, are preparing to boost exports within weeks. A tanker that’s supposed to collect crude from a key Libyan terminal for the first time in almost two years should load by Saturday. The oil surplus will last longer than previously thought, the International Energy Agency said Tuesday.

Oil has fluctuated since rallying in August amid speculation the Organization of Petroleum Exporting Countries and Russia would agree on measures to stabilize the market at a meeting in Algiers later this month. All 14 members will attend the Sept. 27 meeting, according to an official with knowledge of the plans.

"The headlines about Libya restarting shipments from a closed port are sending us lower," said Phil Flynn, senior market analyst at Price Futures Group in Chicago. "Increased shipments are going to add to the global glut."

West Texas Intermediate for October delivery fell 88 cents to settle at $43.03 a barrel on the New York Mercantile Exchange. It was the lowest close since Aug. 10. Prices slipped 6.2 percent this week. Total volume traded was 5 percent below the 100-day average.

Dollar Rally

Brent for November settlement declined 82 cents, or 1.8 percent, to $45.77 a barrel on the London-based ICE Futures Europe exchange. The global benchmark closed at a $2.15 premium to WTI for November delivery.

Oil’s decline accelerated as the dollar climbed to the strongest level since July and higher-than-forecast U.S. consumer-price data boosted the outlook for the economy. The Bloomberg Dollar Spot Index, which measures the currency against a basket of 10 peers, rose 0.7 percent. A stronger greenback curbs the investment appeal of raw materials priced in the currency.

"Crude prices fell further once the inflation data came out and boosted the dollar," Flynn said.

The Seadelta is having to wait longer than anticipated to load its cargo from Libya’s Ras Lanuf port for unspecified “technical reasons,” Nasser Delaab, petroleum operations inspector at Harouge Oil Operations, said by phone Friday. The tanker should load Friday or by Saturday at the latest, according to the official, who helps organize oil movements at the port. The tanker, meant to arrive last night, remains at sea, tracking data show.

Libyan Announcement

Libya’s state oil company on Wednesday lifted curbs on crude sales from the ports of Ras Lanuf, Es Sider and Zueitina, potentially unlocking 300,000 barrels a day of supply. In Nigeria, Exxon Mobil Corp. was said to be ready to resume shipments of Qua Iboe crude, while Royal Dutch Shell Plc lifted a force majeure on its Bonny Light crude. Force majeure is a legal clause that allows companies to halt shipments without breaching contracts.

World oil stockpiles will continue to accumulate through 2017, a fourth consecutive year of oversupply, according to the IEA. Just last month, the agency predicted the market would return to equilibrium this year.

Oil explorers continued adding drilling rigs in the U.S. in a sign of optimism that the market will move toward higher prices in the coming year despite the extended supply glut. Drillers haven’t pulled back activity since June.

Gasoline Rally

Gasoline rose for a second day after the restart of a pipeline carrying fuel to New York Harbor was delayed. The projected restart of Colonial Pipeline’s Line 1, which can carry more than 1 million barrels a day of gasoline from the Gulf Coast to the eastern U.S., was pushed back to next week.

"This is clearly a short-term phenomenon, but the Colonial Pipeline is the driver of the market," said Stephen Schork, president of the Schork Group Inc., a consulting company in Villanova, Pennsylvania.

Gasoline for October delivery climbed 3.14 cents to settle at $1.4616 a gallon. It’s the highest close since since Aug. 30.

Oil-market news:

  • Nigeria will resume exports of its Qua Iboe grade by the end of September, targeting shipments of 200,000 barrels a day, according to the Nigeria National Petroleum Corp.
  • The Alberta Energy Regulator approved three new oil-sands projects totaling 95,000 barrels a day of output, the provincial government said in an e-mailed release.
  • Noble Energy Inc. and Marathon Oil Corp. are weighing bids for Silver Hill Energy Partners, a Permian Basin explorer that could fetch more than $2 billion in a sale, according to people familiar with the matter.
Before it's here, it's on the Bloomberg Terminal. LEARN MORE