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Oil market shrugs off Libya crisis amid ample global supply
[NEW YORK] Oil prices fell on Tuesday on expectations that a well-supplied global market, including supplies from growing record US production, would be able to absorb disruptions that have cut Libya's crude production to a trickle.
Brent futures fell 46 cents, or 0.7 per cent, to US$64.74 a barrel, by 12.45pm EST (1745 GMT). US crude fell 7 cents, or 0.1 per cent, to US$58.47 per barrel.
Libya's barrels "although plentiful when around, have not been a reliable count," said Brayton Tom, Senior Risk Manager for INTL FCStone's energy team. "At the end of the day spare capacity is abundant in the region."
Almost all of Libya's crude export capacity is now under force majeure - a waiver on contractual obligations - after pipeline blockades in the east and west of the country hindered oil production.
If Libyan exports are halted for any sustained period, storage tanks will fill within days and production will slow to 72,000 barrels per day (bpd), said a spokesman for state oil company NOC. Libya has been producing about 1.2 million bpd recently.
Anti-government unrest in Iraq, another major oil producer, also supported oil prices initially, but officials later said output from southern oilfields has been unaffected by the unrest.
Any supply disruptions could be offset by increased output from the Organization of the Petroleum Exporting Countries (Opec), which could limit the impact on global oil markets, the head of Japan's petroleum industry body said.
ING said that spare Opec capacity, which stands in excess of 3 million bpd, was reassuring the market.
The International Monetary Fund (IMF) on Monday trimmed back its 2020 global economic growth forecasts by a tenth of a percentage point to 3.3 per cent because of sharper than expected slowdowns in India and other emerging markets. But the IMF said that a US-China trade deal was another sign that trade and manufacturing activity could soon bottom out.
Barclays on Tuesday forecast 2020 oil demand to rise by 1.4 million bpd, 50,000 bpd higher than its previous forecast and up from growth of 900,000 bpd in 2019.
The bank maintained its 2020 forecasts for Brent and West Texas Intermediate (WTI) prices at US$62 and US$57 a barrel respectively.
Thanks to a shale boom, the United States has become the world's top oil producer, with output hitting a record high 13 million bpd, according to government data last week. Weekly US energy reports have been delayed a day this week in observance of the Martin Luther King holiday on Monday.