Oil rises as outages balance trade dispute, OPEC
Oil prices rose on Tuesday, supported by the production losses in Canada, Libya and from the Neutral Zone between Saudi Arabia and Kuwait, but under pressure from higher supply from elsewhere in OPEC and escalating trade conflicts.
Brent crude was up 70 cents at $75.43 a barrel by 1245 GMT. U.S. light crude was 15 cents higher at $68.23.
Kuwait’s energy minister said on Tuesday crude oil production from jointly operated oilfields in the Neutral Zone shared with Saudi Arabia has halted due to technical issues.
He told the Kuwait parliament that output would resume soon.
Meanwhile Eastern Libyan commander Khalifa Haftar’s forces have given control of oil ports to a separate National Oil Corporation (NOC) based in the country’s east.
The official state-owned oil company from the capital Tripoli, also called NOC, will no longer be allowed to handle that oil, in a move the Tripoli government said would increase tension and deepen division.
The output losses follow a move by OPEC and other oil producers last week to increase supply by around 1 million barrels per day (bpd).
Prices have reacted only modestly to the prospect of higher OPEC production, partly because supply has tightened significantly since 2017, and partly because it is not clear exactly how much extra oil will come on to the market or when.
“I would have expected a stronger downward reaction, but the current situation in Libya certainly supports the doubters of the OPEC hike,” said Carsten Fritsch, senior commodities analyst at Commerzbank in Frankfurt.
Production problems at one of Canada’s largest oil sands facilities helped drive front-month U.S. crude to its highest premium above second-month futures since 2014.
Many analysts think markets will stay tight.
“Despite the OPEC agreement (last week) we believe that tight supply is likely to drive oil prices higher during 2018,” said Jason Gammel of U.S. investment bank Jefferies.
Bank of America Merrill Lynch (BoAML) said Brent could rise to $90 a barrel by the second quarter of 2019.
But BoAML said the effects of the global trade dispute between the United States and other major economies including the European Union and China were gradually taking effect.
In a sign of what may lie ahead for economic growth, the escalating trade fight has already led to sharp sell-offs in stock markets, especially in Asia.
“We estimate a demand drop of 44,000 bpd for every 1 percent drop in global trade,” BoAML said.
Source: Reuters (Additional reporting by Henning Gloystein in Singapore; editing by Louise Heavens and Jason Neely)