Oil Slides As IEA Surplus Forecast Overshadows Libya Disruption

Darnell Taylor
January 24, 2020

All eyes on United States weekly EIA Crude Stock data for fresh direction.

Oil prices got down by greater than 2 percent on Wednesday as an industry leftover prediction by the global Energy Agency (GEA) overshadowed apprehension over disturbances to Libya's crude production.

"It's the reason that recent incidents we have seen - with the Iranian general killed, Libya unrest - didn't boost worldwide oil prices", Birol said, referring to the USA killing of an Iranian commander and retaliation by Tehran that boosted prices briefly earlier this month.

Distillate, too, saw inventories increase, by 3.5 million barrels for the week, adding onto last week's large 6.8-million barrel build, while Cushing inventories fell by 429,000 barrels.

Commenting on this development, "recent unrest in Libya has seen the country's National Oil Corporation declaring force majeure, production of about 700kb/d could be held up", said ANZ analysts.

Unless oil facilities return to operation quickly, OPEC member Libya's crude output will be reduced to about 72,000 bpd from about 1.2 million bpd. "Iraq is another producer vulnerable to production risk".

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Brent crude ended the session down $1.38, or 2.1 per cent, at $63.21 while West Texas Intermediate fell $1.64, or 2.8%, to settle at $56.74.

Meanwhile, Brazil's energy minister, Bento Albuquerque, said the country will start talks about joining the Organization of the Petroleum Exporting Countries during a visit to Saudi Arabia in July.

US crude inventories were likely to have fallen for a second week last week, a Reuters poll showed, but gasoline stocks are expected to have risen for an 11th week in a row.

The market expectation was an increase of 3 million barrels.

Prices of oil in the US declined as the crude inventories increased, the West Texas Intermediate (WTI) for March delivery dropped USD1.64 to set at USD56.74 per barrel on the New York Mercantile Exchange. Day holiday on Monday.

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