Oil Prices Rise as Libya Supply Disrupted
March 28 2017 - 5:27PM
Dow Jones News
By Alison Sider and Neanda Salvaterra
Crude-oil prices rose Tuesday as conflict in Libya interrupted
oil production there, providing some relief to investors worried
about an oversupply of crude.
U.S. crude futures rose 64 cents, or 1.34%, to $48.37 a barrel
on the New York Mercantile Exchange. Brent, the global benchmark,
gained 58 cents, or 1.14%, to $51.33 a barrel on London's ICE
Futures Exchange.
Prices rose after Libyan officials said Tuesday that a militia
has shut key pipelines connected to oil fields there, choking off
some 250,000 barrels of oil a day amid a dispute over wage
arrears.
The supply disruption comes as investors are weighing whether
production cuts by the Organization of the Petroleum Exporting
Countries and 11 outside suppliers are helping shrink the oil glut
that has weighed on prices. Libya was exempt from the cuts, and its
output had returned to about 700,000 barrels a day -- partly
offsetting cutbacks by other producers.
Oil prices have faced selling pressure lately as rising crude
production in the U.S. threatens to frustrate a continuing effort
to reduce global stockpiles.
"I think we're just in a new trading range," said Tariq Zahir,
managing member of Tyche Capital Partners. "If it wasn't for Libya
we wouldn't be up at these prices now."
Data show U.S. production has remained above 9 million barrels a
day for the past four weeks, and the number of drilling rigs at
work has steadily risen this year, reaching its highest level since
September 2015.
"We now forecast U.S. crude-oil production to reach a
multidecade high by December, within sight of the all-time high
reached in 1970," said Barclays analysts in a recent note.
But investors haven't abandoned all hope that OPEC's cuts will
be successful.
Data from ICE showed that traders are largely holding on to
their record-high speculative position that Brent prices will rise.
According to ICE figures, speculative net long positions in Brent
declined 8,200 to 397,700 contracts in the week to March 21.
"We've been working steadily higher since the middle of last
night," said John Saucer, vice president of research and analysis
at Mobius Risk Group. While crude prices ended Monday lower, they
settled at the upper end of the day's range -- a signal to would-be
buyers.
Still, Mr. Saucer said the prices may face resistance on their
way back up, as U.S. producers take advantage of any rally to lock
in higher prices for their output by selling futures.
"This market will have some work to do to locate support to move
back above $50," he said.
Some analysts said OPEC is at risk of failing to make a dent in
global inventories unless the cartel decides to extend its cuts
into the second half of 2017 at its meeting May 25.
Analysts and traders surveyed by The Wall Street Journal
forecast that U.S. crude stockpiles rose by 1 million barrels last
week. But they expect gasoline and distillates stocks to show
drawdowns of 1.9 million barrels and 1 million barrels,
respectively. The anticipated declines in refined product
inventories have helped boost crude prices, analysts said. Official
figures, including production rate, will be released on Wednesday
by the U.S. Energy Information Administration.
The American Petroleum Institute, an industry group, said late
Tuesday that its own data for the week showed a 1.9 million-barrel
rise in crude supplies, a 1.1-million-barrel decrease in gasoline
stocks and a 2-million-barrel fall in distillate inventories,
according to a market participant.
Gasoline futures rose 1.6 cents, or 0.99%, to $1.6349 a gallon.
Diesel futures rose 1.42 cents, or 0.95%, to $1.5167 a gallon.
Benoit Faucon and Jenny W. Hsu contributed to this article
Write to Alison Sider at alison.sider@wsj.com and Neanda
Salvaterra at neanda.salvaterra@wsj.com
(END) Dow Jones Newswires
March 28, 2017 17:12 ET (21:12 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.