Oil prices have cratered in recent days following a slew of news, including renewed oversupply fears from Libya.
Last week, the country’s Sharara and El Feel oilfields, which can pump 400,000 barrels per day, came back online.
The National Oil Company (NOC) said on Monday that Libya’s oil production jumped to 760,000 bpd — the highest level since December 2014. Chairman Mustafa Sanalla added that the NOC was working to boost production even further.
And finally, there have been reports that talks between leaders of the two largest rival factions, the head of the UN-backed government Fayez al-Sarraj and General Khalifa Haftar, have “made some progress.“
Market sentiment and oil prices dove amid renewed oversupply fears given that these developments appear to be a positive sign for Libya’s oil sector.
However, there are reasons to remain cautious about a “sustainably strong” return of Libyan oil, said Helima Croft, the head of commodity strategy at RBC Capital Markets.
“[W]e strongly caution against uncorking the champagne just yet as some of the most powerful armed actors are not party to the agreement (most notably the western militias) and the previous political settlements have proved to be short-lived,” she said in a note.
“Hence, we reiterate our view that Libyan output will continue to fluctuate and any output increase remains at risk for reversal.”
Libya’s oil production has sputtered amid the ongoing domestic political, economic, and security challenges since Muammar Gaddafi was overthrown in 2011 as rival governments and numerous armed groups have competed for power.
Notably, Libya’s production comeback hasn’t been the only recent bearish news for oil prices.
Kremlin spokesman Dmitry Peskov said Thursday in a conference call with reporters that “no decision has been made yet” regarding whether Russia will extend its agreement with OPEC and non-OPEC countries to cut production.
Meanwhile, data from the Energy Information Administration released Wednesday showed US crude output jumped to 9.29 million barrels per day — the highest since August 2015. Moreover, crude inventories fell by 930,000 barrels per day, well below analysts’ forecasts of 2.3 million barrel drop.
Oil prices sank to their lowest level since November 2016 on Thursday. West Texas Intermediate crude oil, the US benchmark, was down by 4.3% at $US45.77 per barrel, while Brent crude, the international benchmark, was off 3.8% at $US48.83 per barrel at 1:01 p.m. ET.
Get the latest Oil WTI price here.
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