Libya's Oil Disruptions and Profit-Taking Drive Crude Prices Lower Amid Geopolitical Tensions
Crude oil futures in Asian trading hours Wednesday were moving sideways, with markets so far this week torn between conflicting pricing signals, making for volatile trading conditions.
Price
- Crude oil futures in Asian trading hours Wednesday were moving sideways, with markets so far this week torn between conflicting pricing signals, making for volatile trading conditions.
- Front-month Oct 24 ICE Brent futures were trading at $79.57/b (0445 GMT), compared to Tuesday's settle of $79.55/b.
- At the same time, Oct 24 NYMEX WTI was trading at $75.54/b, versus Tuesday's settle of $75.53/b. MCX Crude oil prices opened at 6,353.
Demand and Supply
- Crude oil prices declined by 2.01% to settle at 6,353, driven by profit-taking after recent gains fueled by supply concerns stemming from escalating tensions in the Middle East and potential disruptions in Libya's oil production. Libya's eastern-based government announced the closure of all oil fields, halting production and exports, which added to the market's anxiety.
- Despite this, the Waha Oil Company, a subsidiary of Libya's National Oil Corporation (NOC), indicated plans to gradually reduce output, warning of a possible complete halt to the country's production.
- Another NOC subsidiary, Sirte Oil Company, also announced a partial reduction in production. Libya's oil production stood at approximately 1.18 million barrels per day in July, according to OPEC's secondary sources.
- On the inventory front, the Energy Information Administration (EIA) reported significant declines in U.S. crude stocks, gasoline, and distillate inventories for the week ending August 16.
- Crude inventories fell by 4.6 million barrels to 426 million barrels, surpassing expectations of a 2.7 million-barrel draw. Stocks at the Cushing, Oklahoma hub decreased by 560,000 barrels, while refinery crude runs increased by 222,000 barrels per day.
- U.S. gasoline stocks dropped by 1.6 million barrels to 220.6 million barrels, and distillate stockpiles fell by 3.3 million barrels to 122.8 million barrels, both exceeding market expectations.
- Technically, the crude oil market is experiencing long liquidation, with a 7.91% decrease in open interest, settling at 7,103 contracts.
- Crude oil is currently supported at 6,291, with a potential test of 6,229 levels if support breaks. Resistance is likely at 6,464, and a move above this level could see prices testing 6,575.
News
- The Centre for Accountability and Transparency (CAAT) has called for an investigation into Matrix Oil’s importation of blended crude oil, alleging violations of international sanctions on Russian oil.
- Speaking at a press conference, convener Okwa Dan claimed that Matrix Oil’s actions constitute economic sabotage, environmental pollution, and health risks to Nigerians.
- The group alleges that Matrix Oil imported adulterated petroleum products from Malta, resulting in a $2.8 billion bill for Nigeria in 2023 alone.
- Dan added that the company’s actions violate international sanctions on Russian crude oil, which could lead to diplomatic crises for Nigeria.
- “The oil products imported from Malta by this company are also unethical because they result from violating international sanctions imposed on Russia to deter it from waging an unjust war on a sovereign nation, Ukraine, which it invaded,” the statement said.
- “The sanctions capped the purchase of Russian crude at $60 per barrel, but the landing cost claimed by Matrix Energy Limited is confirmation that they are paying higher than the capped price for Russian crude that they blend and refine in Malta. This exposes Nigeria to diplomatic crises that could further compound all that we are going through."
Expert's Opinion
- Refinery margins, the key driver for crude demand, remain weak, leading to lower prices, potentially worsened by the prospect of rising non-OPEC and, not least, OPEC+ supply as the group begins to unwind voluntary cuts.
- Nevertheless, geopolitical risks continue to underpin markets, including Libya's eastern government declaring force majeure on oil production and exports in a dispute with its Tripoli-based rival over control of the central bank.