Oil falls as surplus forecast eclipses Libya disruption


Oil prices fell on Wednesday as a market surplus forecast by the International Energy Agency (IEA) outweighed concern over disruptions to Libya’s crude output. Brent crude LCOc1 was down 48 cents, or 0.7%, at $64.11 a barrel by 1311 GMT. West Texas Intermediate CLc1 fell 57 cents, or 1%, to $57.81.
The head of the IEA, Fatih Birol, said he expects the market to be in surplus by 1 million barrels per day (bpd) in the first half of this year. “I see an abundance of energy supply in terms of oil and gas,” Birol told the Reuters Global Markets Forum on Tuesday while attending the World Economic Forum meeting in Davos.
“It’s the reason that recent incidents we have seen – with the Iranian general killed, Libya unrest – didn’t boost international oil prices,” Birol added, referring to the U.S. killing of an Iranian commander and retaliation by Tehran that boosted prices briefly this month. Libya’s National Oil Corp on Monday declared force majeure on the loading of oil from two major oilfields after the latest development in a long-running military conflict.
Unless oil facilities return to operation quickly, OPEC member Libya’s crude output will be reduced to about 72,000 bpd from about 1.2 million bpd. “The Libyan pipeline blockade continued to have a muted impact on sentiment … There is a consensus that the disruption will prove short-lived,” said Stephen Brennock of oil broker PVM.
Meanwhile, Brazil’s energy minister, Bento Albuquerque, said the country will start talks about joining the Organization of the Petroleum Exporting Countries during a visit to Saudi Arabia in July. Markets are also focusing on the emergence from China of a new coronavirus and the possible impact a pandemic might have on global economic growth.
Should the virus develop dramatically and hit travel and growth, demand for oil could fall by 260,000 bpd, Goldman Sachs said in a note. “Demand concerns over a potential epidemic will counter concerns around supply disruptions in Libya, Iran and Iraq, driving spot price volatility in coming weeks,” Goldman said, though the “impact on oil fundamentals remains limited so far”. Supply is still likely to rise, with U.S. crude production in large shale deposits expected to rise to record highs in February, though the pace of increase is likely to be the lowest in about year, the U.S. Energy Information Administration (EIA) said on Tuesday.

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