As a result of Libya declaring force majeure on its oil supplies on Monday, oil prices in the World market rose on Tuesday, 3rd July 2018. However, increased production from U.S and OPEC still kept the market going.
Brent crude oil futures were at $78.06 per barrel at 0112 GMT, up 76 cents, or 1 percent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures were up 75 cents, or 1 percent, at $74.
Libya’s National Oil Corporation (NOC) announced the declaration of force majeure on supply from Zueitina and Hariga ports on Monday causing a significant loss of 850,000 barrels per day (bpd)
According to a Reuter’s survey on Monday 2nd July 2018, Organization of Petroleum Exporting Countries (OPEC)’s total output in June was 32.32 million barrels per day (bpd), 320,000 bpd up from production in May. Nevertheless, the commotions in Libyan supply outweighed these increased supplies, thus causing a price escalation on Tuesday.
Fortunately, with U.S’s amplified production which has increased by 30 percent in the last two years, the market has been able to steady itself against shocks due to disrupted supply from not only Libya, but Canada as well.
Analysts believe that the main factors steering the prices are the OPEC’s supply policy and Libyan supplies. “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.
Another point of concern is the slowing demand growth in U.S. and Asia. Rising fuel prices in the U.S has caused a lower demand growth for petroleum. “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,” Braclays bank said, adding that this was mostly due to higher fuel prices.
Moreover, due to higher costs, seaborne oil imports in Asia have been reducing significantly since May. Ongoing trade disputes between China and U.S. further adds to the uncertainty that has troubled the markets recently.