Oil dips as surplus forecast overshadows Libya disruption

Send a link to a friend  Share

[January 22, 2020]  By Noah Browning

LONDON (Reuters) - Oil prices fell on Wednesday as a market surplus forecast by the International Energy Agency (IEA) outweighed concern over disruptions to Libya's crude output.

Brent crude <LCOc1> was down 39 cents, or 0.6%, at $64.20 a barrel by 1140 GMT. West Texas Intermediate <CLc1> also fell 39 cents, or 0.7%, to $57.99.

The head of the IEA, Fatih Birol, said he expects the market to be in surplus by 1 million barrels per day (bpd) in the first half of this year.

"I see an abundance of energy supply in terms of oil and gas," Birol told the Reuters Global Markets Forum on Tuesday while attending the World Economic Forum meeting in Davos.



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

Libya's National Oil Corp on Monday declared force majeure on the loading of oil from two major oilfields after the latest development in a long-running military conflict.

Unless oil facilities return to operation quickly, Libya's crude output will be reduced to about 72,000 bpd from about 1.2 million bpd.

"The Libyan pipeline blockade continued to have a muted impact on sentiment ... There is a consensus that the disruption will prove short-lived," said Stephen Brennock of oil broker PVM.

Markets are also focusing on the emergence from China of a new coronavirus and the possible impact a pandemic might have on global economic growth.

[to top of second column]

The sun sets behind an oil pump outside Saint-Fiacre, near Paris, France September 17, 2019. REUTERS/Christian Hartmann

Should the virus develop dramatically and hit travel and growth, demand for oil could fall by 260,000 bpd, Goldman Sachs said in a note.

"Demand concerns over a potential epidemic will counter concerns around supply disruptions in Libya, Iran and Iraq, driving spot price volatility in coming weeks," Goldman said, though the "impact on oil fundamentals remains limited so far".

Supply is still likely to rise, with U.S. crude production in large shale deposits expected to rise to record highs in February, though the pace of increase is likely to be the lowest in about year, the U.S. Energy Information Administration (EIA) said on Tuesday.

Inventories of crude oil in the United States are 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.

(GRAPHIC: U.S. petroleum inventories - https://fingfx.thomsonreuters.com/
gfx/editorcharts/US-PETROLEUM-INVENTORIES/
0H001QXMB9NY/eikon.png)

(Reporting by Noah Browning and Aaron Sheldrick; Editing by Jason Neely and David Goodman)

[© 2020 Thomson Reuters. All rights reserved.]

Copyright 2020 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.  Thompson Reuters is solely responsible for this content.

Back to top