Oil Rose on the Week
Oil rose in thin trading ahead of the US holiday weekend as export disruptions in Libya exacerbated global supply concerns.
West Texas Intermediate rose over $108 a barrel, posting a slight weekly gain after dropping the previous two weeks. Production from the Organization of Petroleum Exporting Countries dropped by 120,000 barrels a day in June for a second straight monthly decline, according to a Bloomberg survey. Libyan exports have fallen to about one-third of last year’s level after a worsening political crisis prompted the suspension of shipments from two of the nation’s biggest ports.
“Crude prices are finishing the week on a high note as Libya’s political crisis is leading to a steep drop with oil exports. We’ve seen this movie before and a tight oil market and force majeure at key ports should provide underlying support for oil prices,” said Ed Moya, senior market analyst at Oanda Corp.
Friday’s rebound comes after crude ended June down 8% on the month as investors fretted over a potential global slowdown. Oil has increased enough to alarm US President Joe Biden, who’s pushing for cheaper gasoline at home while spearheading efforts to get producers in the Middle East to boost crude output.
Withing OPEC, erratic exporter Nigeria drove the loss, with output slumping to a record low. Yet even Saudi Arabia -- which Biden will visit this month -- failed to deliver its promised increase. Nigeria’s output dropped by 100,000 barrels a day to 1.2 million a day, the lowest since the country joined the ranks of major producers, according to data compiled by Bloomberg.
Risk of weaker fuel exports is also emerging in India after the government on Friday increased levies on shipments of gasoline and diesel as part of a drive to control a worsening currency deficit. India is a major global fuel supplier and a drop in sales could further tighten markets that have been reeling from reduced Russian shipments.
Still, the market for real crude barrels remains firm. Premiums for North Sea oil remains strong, while crude from Angola is selling fast as European refiners buy more cargoes with supply drying up from some of the continent’s biggest supplies. The scarcity is highlighted in crude’s futures curve remaining backwardated, where near-term contracts are more expensive than those for later delivery.
- WTI for August delivery rose $2.67 to settle at $108.33 a barrel in New York, to post a 0.8% gain for the week
- Brent for September settlement climbed $2.60 to settle at $111.63 a barrel
Traders will be scrutinizing the next moves by OPEC and its allies. While the group this week ratified an oil-production increase for August, it left the more-pressing issue of future output levels unresolved.
Meanwhile, US demand remains robust as a record number of drivers are expected to hit the road this weekend for Independence Day travel, buttressing gasoline consumption. Average retail pump prices have eased slightly in recent weeks after hitting a record above $5 a gallon in June.
(With Alex Longley and Devika Krishna Kumar)
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