Oil prices rose to higher ground on Libyan outage and Saudi optimism
- Oil prices rose on reports of a Libyan outage.
- Oil is also helped by a lower USD and upbeat comments by the Saudi Energy minister.
WTI Crude Oil is trading around 63.60 in the New York session, rising by 1.32% on reports of an outage in Libyan supply and Saudi optimism. There were some reports of a dip in Libyan production earlier on Friday.
Crude rebounded from an early loss after reports of the shutdown of the El Feel oilfield in Libya, which produces 70,000 bpd. Production in this OPEC member country has been running at about 1 mbpd, although it remains volatile due to unrest in the country.
Oil is also boosted by upbeat comments from Saudi Arabia that an OPEC-led effort to erode stockpiles through output curbs is “working”. In the latest OPEC comment that a supply cut deal led by the OPEC and by NON-OPEC members is working, Saudi Arabia's Energy minister said that he expected inventories to keep declining this year: "The oil markets, it's clear, are rebalancing. Many agencies have documented the decline in inventories and I think that'll continue in 2018”.
Earlier, oil prices traded lower as rising US oil production and exports weighed. Crude exports jumped to more than 2 mbpd, close to a record.
The market is concerned that as the US is pumping out a record amount of oil, that the bull rally which we have seen for the black gold could fade away as the US oil production undermines the OPEC production cut commitments. But falling Venezuelan production may be also compensating for the rising US production. According to reports, OPEC is also set to discuss the oil issue with Venezuela shortly.
On Thursday oil rallied to 2-week highs and closed higher. Crude oil prices were supported by a weaker dollar, the unexpected -1.62 million bbl decline in EIA crude inventories (weaker than expectations for a +3.0 million bbl build), and the -2.66 million bbl decline in crude supplies at Cushing to a 3-year low. But it may also be a function of low import figures contributed to the decline
US production is expected to rise even more this year and could exceed 11 mbpd in late 2018, a headwind for OPEC efforts to drain stockpiles and rebalance the market. All eyes will be now on the weekly Baker Hughes Oil rigs report to gauge the trajectory of US production. The count of US oil rigs was at 798 last week, a multi-year high.
Technically, Oil has to sustain above the 63.75 area for a further rally towards the 64.05-64.85 zone in the coming days; Otherwise, sustaining below 63.35, it may again fall to 62.75-61.30 area.