Oil Breaks above $81 over Political Play in Libya
Oil prices broke back above US$81 per barrel in the global commodities market, rallying more than 3% due to expectations that the supply side would be tightened. Prices of crude oil increased after reports that Libyan oil production would be halted due to political fighting.
According to reports, the internationally recognised Tripoli-based government wants to replace the current governor of the central bank of Libya.
However, the unrecognised Eastern Libyan government backs the current governor, and in what appears to be a negotiating tactic has threatened to stop oil production, which is largely based in the east.
This is important for the oil market as Libya produces between 1.1- 1.2 million barrels per day. How significant it is for prices will depend on the duration of the stoppage, ING said.
Analysts stated that a prolonged outage will leave the market in a deeper deficit. This will not only be supportive for flat prices and time spreads but also for the Brent-Dubai spread, given that Libya produces a light sweet crude oil.
The Brent/Dubai spread was already set to widen as we move towards the end of the year and through 2025 if OPEC+ were to stick to the plan of gradually unwinding supply cuts.
European natural gas prices had a fairly volatile day yesterday, initially trading lower, but TTF managed to finish the day up 2.15%. This is after Russia carried out attacks on Ukrainian energy infrastructure, which included gas compressor stations.
The attacks do not appear to have had an impact on flows to Europe. In addition, Norwegian gas flows to Europe have started to edge lower as scheduled maintenance work gets underway. The market will be following this maintenance closely and will be sensitive to any overruns. #Oil Breaks above $81 over Political Play in Libya
