Crude Rises as Libya Seen Cutting Shipments From Biggest Field

  • Libyan crude output said to decline to 560,000 barrels a day
  • U.S. crude supplies rose 1.91 million barrels last week: API

Barclays' Cohen Says Oil's Fall a 'Short-Term Blip'

Crude rose on reports Libya has curbed shipments from its biggest field, tempering concerns about the global supply glut.

Futures rose 1.3 percent in New York after the North African country was said to declare force majeure in the loading of Sharara crude from the Zawiya terminal. Force majeure is a legal clause that allows companies to halt shipments without breaching contracts. Libya’s output has dropped to 560,000 barrels a day following the shutdown of the pipe from the Sharara field, a person with knowledge of the matter said earlier. Prices were little changed after an industry report was said to show U.S. supplies rose last week.

If a government report on Wednesday also shows U.S. supplies are rising, it would be further evidence that increased American output is blunting the effect of production curbs by OPEC and its allies. Five OPEC countries joined with non-member Oman on the weekend to voice support for prolonging their deal to cut output past June. Output in Libya, exempt from the cuts, had climbed back to 700,000 barrels a day before the pipeline halt.

"In recent months Libya has been producing 600,000 to 700,000 barrels a day and output was trending higher," Mike Wittner, head of commodities research at Societe Generale SA in New York, said by telephone. "Libyan crude is of a very high quality and on the Mediterranean. Refiners don’t count on it but are very happy when it’s available."

WTI for May delivery advanced 64 cents to settle at $48.37 a barrel on the New York Mercantile Exchange. Total volume traded was about 15 percent below the 100-day average. Prices declined 0.5 percent to $47.73 on Monday.

Prices were little changed from the settlement after the American Petroleum Institute was said to have reported that U.S. crude supplies rose 1.91 million barrels last week. May futures traded at $48.35 at 4:38 p.m. after the API report

See also: OPEC likely to extend cuts as glut fails to clear, Vitol says

Brent for May settlement climbed 58 cents, or 1.1 percent, to $51.33 a barrel on the London-based ICE Futures Europe exchange, and closed at a $2.96 premium to WTI. 

‘Deeply Unstable’

Libya’s state-owned National Oil Corp. also declared force majeure on loadings of Wafa field condensate from the Mellitah terminal, according to a person familiar with the situation, who asked not to be identified for lack of authorization to speak to the media.

The Libyan outage is “a substantial loss of output, but the important question for the market will be whether this turns into a lengthy disruption or not,” said Richard Mallinson, an analyst at London-based consultants Energy Aspects Ltd. “The political and security situation remains deeply unstable.”

Clashes among rival armed groups in early March led to the closing of two of the nation’s biggest oil export terminals, forcing a number of other fields to halt production. The ports have since reopened. Libya pumped as much as 1.6 million barrels a day before a 2011 uprising led to the ouster of former leader Moammar Qaddafi and a breakdown in central authority that stunted oil output.

U.S. Stockpiles

U.S. crude supplies probably rose by 2 million barrels last week, a Bloomberg survey showed. Stockpiles are at the highest level in weekly data compiled by the Energy Information Administration since 1982. Gasoline inventories fell a sixth week, according to the survey.

"We’re also getting support from gasoline," Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by telephone. "As gasoline goes, so goes crude to a certain extent."

April gasoline futures climbed 1 percent to close at $1.6349 a gallon on the Nymex.

Oil-market news:

  • U.S. oil output will approach the highest level since 1970 by December, according to a report from Barclays Plc.
  • Abu Dhabi National Oil Co. will reduce volumes of Murban and Das crude in May by 7 percent in order to meet the U.A.E.’s commitment to OPEC, Adnoc said in a statement.
  • Mercuria Energy Group Ltd., one of the world’s five largest independent oil traders, grew full-year net income by 10 percent in 2016 as strong natural gas, power, coal and iron ore trading results offset lower volumes.
  • Saudi Aramco could have a market value of more than $1 trillion in an initial public offering after the government slashed the oil producer’s tax burden to attract investors, analysts at Sanford C. Bernstein & Co. and Rystad Energy AS said.

— With assistance by Grant Smith

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