Oil prices rose on Tuesday after Libya declared force majeure on some of its supplies, although an overall rise in OPEC output and slumping Asian markets kept a lid on gains.
Brent crude oil futures LCOc1 were at 77.87 dollars per barrel at 0632 GMT, up 57 cents, or 0.7 per cent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were up 77 cents, or one per cent, at 74.71 dollars.
“The Libyan power struggle between the Tripoli-based National Oil Corp that is internationally recognised and controls the export sales and the NOC-East group based in Benghazi that currently has physical control of the infrastructure … wipes out the planned increase from the OPEC+ coalition,” said Stephen Innes, Head of Trading for Asia-Pacific at futures brokerage OANDA in Singapore.
OPEC’s June output was 32.32 million barrels per day (bpd), a Reuters survey showed on Monday, up 320,000 bpd from May.
The June total is the highest since January 2018.
Libya’s National Oil Corporation (NOC) declared force majeure on loadings from Zueitina and Hariga ports on Monday, resulting in 850,000 bpd of supplies being disrupted.
Traders have also been watching U.S. oil production C-OUT-T-EIA, which has surged by 30 per cent over the last two years, but analysts said OPEC’s production policy and unplanned supply disruptions were currently the main focus.
“In the near-term, the level of OPEC production – deployment of spare capacity by Saudi Arabia, Iraq, UAE, Kuwait (and ex-OPEC by Russia), and involuntary disruptions in Libya, Venezuela, Iran – are more important drivers of crude prices,” Goldman Sachs said in a note published late on Monday.
The UAE’s Abu Dhabi National Oil Co (ADNOC), a major producer within OPEC, said on Tuesday it is able to increase production by several hundred thousand bpd if needed.
Outside the supply-side, a slowdown in demand is emerging, potentially ending years of consecutive records.
“U.S. petroleum demand growth slowed significantly to 385,000 bpd year-on-year in April, compared with a growth of more than 730,000 bpd year-on-year in Q1,” Barclays bank said, adding that this was mostly due to higher fuel prices.
In Asia, the world’s top oil consuming region, seaborne oil imports have been falling since May, as higher costs turned off consumers and as the escalating trade dispute between the U.S. and China starts to impact the economy.
Chinese stocks went into a tail spin on Tuesday as turbulence gripped equity markets in Asia, which sank to nine-month lows as investors feared the Sino-U.S. trade row could derail a rare period of synchronised global growth.
“There are … signs that growth in China has slowed in recent months, particularly infrastructure spending by local governments.
“I would assume that infrastructure investment is quite energy intensive, so perhaps that had a knock-on effect to oil demand,” said Frederic Neumann, Co-Head of Asian Economic Research at HSBC in Hong Kong.
“At this stage, however, it appears more that growth in Asia is softening, rather than decelerating sharply,” he added.