Oil prices dropped Tuesday on expectations that a well-supplied global market, including provides from record U.S. manufacturing, would be able to soak up disruptions that have pared Libya’s crude production to a trickle.
Brent futures ended down 20 cents at $64.59 per barrel. U.S. crude tanked 20 cents, i.e., 0.3%, to $58.38 a barrel.
Libya’s barrels, “although in abundance when around, haven’t been a reliable count,” mentioned Brayton Tom, senior risk supervisor for INTL FCStone’s energy group.
Nearly all of Libya’s crude export capacity is now under force majeure – a reservation on contractual duties – after pipeline blockades in the east and west of the country controlled oil production.
If Libyan exports are halted for any sustained period, storage tanks will fill within days and manufacturing will slow to 72,000 barrels per day (BPD), stated a spokesperson for state oil firm NOC.
Libya has been pumping about 1.2 million BPD recently.
Anti-authorities unrest in Iraq, another main oil producer, additionally supported oil prices initially; however, delegates later mentioned production from southern oilfields has been unaffected by the crisis.
Any supply disruptions could be balanced by increased production from the Group of the Petroleum Exporting Countries (OPEC), which might limit the influence on global oil marketplaces, the pinnacle of Japan’s petroleum industry body mentioned.
ING stated that spare OPEC capacity, which stands in excess of 3 million BPD, was encouraging the industry.