Oil Rose as Protests Force Largest Oil Field in Libya to Close

Oil rose as the shutdown of Libya’s biggest oil field strains an already under-supplied market, overshadowing signals that China’s drastic pandemic lockdowns are weighing on economic growth.

Brent crude futures settled above $113 a barrel for the first time since late March while West Texas Intermediate oil closed just above $108. Global crude markets face further supply disruptions after demonstrations against Libyan Prime Minister Abdul Hamid Dbeibah shut down Sharara, the country’s biggest oil field. Protesters also forced two of the North African nation’s ports to halt loadings with output halted at the El Feel field. 

Earlier, prices had been falling on bearish Chinese economic data. The world’s second-largest economy reported the biggest decline in consumer spending and its worst unemployment rate since the pandemic emerged, compounding threats to global growth.

Oil rallied above $100 this year as Russia’s war in Ukraine disrupted an already-tight market and prompted some traders to shun Russian crude. The price surge spurred the U.S. and allies to make of millions of barrels of strategic reserves to quell inflationary pressures. Nonetheless, global supplies remain tight with the European Union considering banning Russian crude and OPEC+ standing firmly against accelerating production increases.

A key oil market indicator suggests that bullish sentiment is rising. Brent’s so-called prompt spread, the difference between its two nearest contracts, surged to $1.15, up from 21 cents a week ago. 

Any “embargo decision by the EU would be a catalyst for even higher oil prices,” said Pavel Molchanov, an analyst at Raymond James & Associates Inc. “Realistically, it would not be viable to replace” all of the crude that would be disrupted from a European Union ban on Russian crude.

Russia’s Deputy Prime Minister Alexander Novak said last week that if more nations banned Russian energy flows, prices may “significantly exceed” historic highs. The U.S. and U.K. have moved to bar crude from the country in retaliation over Moscow’s invasion of Ukraine.

Prices:

• West Texas Intermediate for May delivery rose $1.26 to settle at $108.21 a barrel in New York.
• Brent for June settlement rose $1.46 to $113.16.

In a weekend phone call, Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman gave a “positive assessment” of their efforts to stabilize the oil market, suggesting that no change in production policy is likely. The two nations lead the alliance that groups the Organization of Petroleum Exporting Countries and its partners, known as OPEC+.

Oil’s surge this year has been part of a wider advance in energy commodities that’s seen prices extend gains even as the outlook for global economic growth dims. On Monday, U.S. natural gas prices hit the highest level in more than 13 years as robust demand tests drillers’ ability to expand supplies.