Oil Prices Struggle for Direction Amid Supply Risks, Economic Doubts

— Oil prices were mixed Friday morning as potential risks to Libyan supply were weighed against renewed concerns over a global economic slowdown.

— Brent crude, the global oil benchmark, was trading up 0.24% at $61.78 a barrel on London’s Intercontinental Exchange.

— West Texas Intermediate futures, the U.S. oil standard, were down 0.15% at $52.56 a barrel on the New York Mercantile Exchange.

HIGHLIGHTS

Libya: Prices were being supported somewhat Friday morning after clashes resumed near Libya’s biggest oil filed, the Sharara, dashing expectations that production will resume soon there. On Wednesday, a Libyan general took control of the field, raising the likelihood the facility will restart production. It has a capacity of roughly 300,000 barrels a day. The facilities were shut down late in 2018 after a group of armed gunmen took control of the field demanding better living conditions in the region.

“The disruptions will not be resolved soon…and keep giving some support to oil prices,” said Giovanni Staunovo, commodities strategist at UBS Wealth Management.

Global Economy: Ongoing concerns about softer global economic growth and knock-on effects on world oil demand have kept a ceiling on prices in recent weeks.

“Growing economic concerns, falling stock markets and emerging doubts that the trade conflict between the U.S. and China will be resolved are putting oil prices under pressure,” according to analysts at Commerzbank. “Following its steep rise at the beginning of the year, Brent has mostly been moving in a narrow range of between $60 and $63 per barrel since mid-January,” the analysts noted.

“Fears about a global economic slowdown and the correction seen on stock markets in the last few days are pulling down the oil price,” said Carlo Alberto de Casa, chief analyst at ActivTrades. “The bullish momentum seen in early January has lost impulse and crude is now caged in a lateral phase,” he added.

Brent and WTI have both risen roughly 20% since reaching annual lows in the last week of December.

INSIGHT

‘NOPEC’: A bipartisan group of U.S. senators on Thursday unveiled a bill that would allow the Justice Department to sue members of the Organization of the Petroleum Exporting Countries for antitrust violations. The House Judiciary Committee Thursday advanced a parallel measure.

“If the U.S. Nopec legislation is voted through and becomes law it could definitely be bearish for oil prices right here and now given that OPEC+ is in the midst of tactical production cuts right this moment,” said Bjarne Schieldrop, chief commodities analyst at SEB Markets.

The potential legislation comes as OPEC is looking to formalize closer ties with its partner allies outside the oil-cartel, led by Russia. OPEC, de facto led by Saudi Arabia, and its allies agreed late last year to hold back crude output by a collective 1.2 million barrels a day for the first half of this year. The latest production curb deal between the producers was meant to rein in a burgeoning supply glut and boost prices.

AHEAD

— Baker Hughes on Friday releases weekly data on the number of rigs drilling for oil in the U.S.

— OPEC and the International Energy Agency release their monthly oil market reports on Tuesday and Wednesday, respectively.
Source: Dow Jones