Oil climbed for the first time in four days on concern that production disruptions in Libya may pare a global surplus that’s driven crude to a five-year low.
Libyan output has fallen below 300,000 barrels a day, the lowest since May, after militants shifted attacks to energy facilities including the country’s largest oil export terminal, according to Energy Aspects Ltd. estimates. The U.S. Commerce Department said lease condensate “processed through a crude oil distillation tower” is a petroleum product, exempt from U.S. export restrictions.
Oil has slumped 45 percent this year, set for the biggest annual decline since 2008, as the highest U.S. production in more than three decades contributed to a global surplus estimated by Qatar at 2 million barrels a day. Saudi Arabia, which is steering the Organization of Petroleum Exporting Countries to resist cutting output, has said it’s confident that prices will rebound as
economic growth boosts demand.
“The market is rebounding on the ongoing concerns about Libya,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “It does seem that the U.S. export wall is coming down. It’s another reason to cover your shorts.”
WTI for February delivery rose 51 cents, or 1 percent, to $54.12 on the New York Mercantile Exchange after earlier falling as far as $52.70, the lowest since May 2009. The volume of all futures traded was about 37 percent below the 100-day average for the time of day.
Libya Production
Brent for February settlement added 2 cents to $57.90 a barrel on the London-based ICE Futures Europe exchange after sliding to $56.74, also the lowest since May 2009. Volume was 29 percent below the 100-day average. The European benchmark crude traded at a premium of $3.78 to WTI on the ICE.WTI held gains after the American Petroleum Institute was said to report an increase in crude stockpiles of 760,000 barrels last week, according to a Twitter posting by Anthony Headrick.
Libya’s oil production is down at least 65 percent from a recent high of 850,000 barrels a day in October following the assault on the Es Sider terminal, according to Energy Aspects. The country holds Africa’s largest oil reserves.
The fighting last week marked a turning point in the unrest that followed Muammar Qaddafi’s 42-year rule, according to Energy Aspects and Eurasia Group consultants. All the factions, including the Islamist militia coalition known as Libya Dawn, had committed to spare the energy industry that provides 80 percent of public spending.
U.S. Exports
The Commerce Department’s Bureau of Industry and Security said in guidelines released today that the agency will review export requests on a case-by-case basis.The U.S. banned most crude exports in 1975, with a few exceptions including shipments to Canada. Exports of refined products such as gasoline and diesel fuel are unrestricted.
Pioneer Natural Resources Ltd. and Enterprise Products Partners LP said in June that the Commerce Department has approved their plans to export condensate. The product is heated in stabilizers and distillation towers, which qualifies it as a refined fuel eligible for shipping abroad, they said.
U.S. stockpiles are projected to have climbed 900,000 barrels to 388.1 million barrels last week, the highest for the period in data going back to 1982, a Bloomberg News survey shows before Energy Information Administration data tomorrow. The EIA, the Energy Department’s statistical, will release its weekly report tomorrow.
“All this North American oil has really changed the tone of the market,” said Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut. “We have a global surplus of oil.”
Venezuela Call
The slump in oil prices has contributed to the steepest annual slide in the ruble since 1998, given crude is Russia’s main export earner. OPEC has so far resisted calls from cash-strapped Venezuela to act and stem the rout in prices.U.S. production from fracking is flooding the market, Venezuela President Nicolas Maduro said in a speech broadcast on state television yesterday. The South American country had called for an output cut at OPEC’s Nov. 27 meeting in Vienna.
OPEC, which supplies about 40 percent of the world’s oil, pumped 30.56 million barrels a day in November, according to data compiled by Bloomberg. That exceeded its collective target of 30 million for a sixth straight month.
U.S. production growth may slow next year as companies reduce spending and drilling, said James Williams, an economist at WTRG Economics, an energy-research firm in London, Arkansas. Production expanded to 9.14 million through Dec. 12, the most in weekly data that started in January 1983, according to the EIA.
U.S. rigs targeting oil declined by 37 to 1,499 in the week ended Dec. 26, the lowest since April, Baker Hughes said on its website yesterday, extending the three-week decline to 76. That’s the biggest weekly decline since 2012.
“By mid-year we should see production growth slowing,” Williams said.
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