Oil Slides to One-Month Low as Libya Restarts its Biggest Fieldby
Crude from Libya’s Sharara is flowing to Zawiya refinery
U.S. gasoline, distillate supplies jump by most since January
Oil slid to a one-month low as Libya reopened its biggest field and increases in U.S. product inventories and crude output weighed on the market.
Futures dropped 1.3 percent in New York. Crude from the Sharara field in Libya has started flowing to the Zawiya refinery, according to a person with direct knowledge of the matter. A force majeure on its western port of Zawiya has been lifted, according to a person familiar with operations. Both U.S. gasoline and distillate stockpiles rose by the most since January last week, according to an Energy Information Administration report Wednesday. Nationwide crude output is at the highest level since August 2015.
Oil has declined over the past two weeks amid concern that rising U.S. output will offset efforts by the Organization of Petroleum Exporting Countries and its allies to trim a global glut. Russia, which joined the bloc in cutting production in the six months to June, may find it more difficult to extend the deal as that would constrain plans by local companies to expand. Russian Energy Minister Alexander Novak said this week his country will wait to decide on joining OPEC in prolonging the output curbs.
"The market is technically weak and the Libya headline was the excuse we needed to sell off," Phil Flynn, senior market analyst at Price Futures Group in Chicago, said by telephone. "We don’t know how long it will be online though, but as long as it’s operating it adds to the perception of an oversupplied market."
West Texas Intermediate for June delivery dropped 65 cents to settle at $48.97 a barrel on the New York Mercantile Exchange, the lowest level since March 28. Total volume traded was about 15 percent above the 100-day average.
Brent for June settlement, which expires Friday, slipped 38 cents to end the session at $51.44 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $2.47 premium to WTI.
Investors are focusing on what the market looks like coming out of refinery maintenance season and are evaluating whether the storage glut is going to reappear in the form of refined product builds, Michael Tran, a commodities strategist at RBC Capital Markets in New York, said by telephone.
U.S. gasoline inventories climbed to the highest level in five weeks and distillate supplies rose by 2.65 million barrels, according to data from the EIA. Refineries processed 17.3 million barrels of crude a day, a record amount. Crude stockpiles slid by 3.64 million barrels and nationwide crude output rose by 13,000 barrels a day to 9.27 million a day.
Gasoline futures for May delivery fell 2.5 percent to settle at $1.5500 a gallon, the lowest level since late February. The gasoline crack spread, a rough measure of the profit from refining crude into the fuel, fell as much as 6.6 percent to about $16.20 a barrel.
Oil supply and demand will rebalance in the second half of the year and OPEC is satisfied with participants’ compliance with the production cuts, the group’s Secretary-General Mohammad Barkindo said in a Bloomberg Television interview Thursday. Saudi Arabia’s Energy Minister Khalid Al-Falih is engaging with many members of the bloc to achieve consensus before their next meeting in May, he said.
“The focal point in terms of where the bearishness is being concentrated is really just the U.S.,” Tran said by telephone. “The rest of the world is moving in a more constructive fashion.”
- While compliance with promised cuts by OPEC countries is “excellent,” commercial oil stockpiles remain “stubbornly” high, Total Chief Executive Officer Patrick Pouyanne said at summit in Paris.
- The OPEC deal has accelerated the rebalancing of the market and there’s been a rapid drawdown in floating oil storage, Saudi Aramco CEO Amin Nasser said in Paris. Oil demand will continue to be healthy in the foreseeable future, he said.