Oil prices creep closer to $56 on Libyan pipeline blockade, Syria

Tensions in the Middle East as well as a protests in Libya have helped increase oil prices. Repsol photo.

Oil prices also supported by OPEC supply deal compliance

Oil prices closed in the $56/barrel mark on Monday after protesters shut down a Libyan pipeline over the weekend and geopolitical tensions heightened after last week’s missile strike on Syria by the United States.

On Sunday, a group blocked a pipeline linking the Sharara oilfield to one of the country’s oil terminal, according to a Reuters’ source.

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The Sharara field had recently returned to production following a week-long shutdown that ended in early April.

The latest outage adds to the oil price rally that began last week after the US fired missiles at a Syrian government air base.  The air base was quickly brought back into operation and Syria is a relatively small oil producer, but tensions in the oil-rich Middle East have risen since the attack.

“There are a few geopolitical problems at the moment. On top of that, Libya isn’t producing oil, so that’s adding to the bullish side of the market,” Phil Flynn, analyst at Price Futures Group told Reuters.

Brent crude was up by 74 cents to $55.98 at the end of the session, just below the one-month high of $56.08 that was reached on Friday.  US crude was up 84 cents to $53.08

The OPEC supply cut deal is also supporting oil prices.

Reuters reports Kuwait’s Oil Minister Essam al-Marzouq says he expects producers’ compliance in March to their pledges in the deal to “be higher than the previous couple of months.” He added he also saw “positive indications” in the decline of global oil stocks.

The recent price rally has encouraged US shale production.  The Energy Information Administration reported last week that US crude inventories reached record highs both at the Cushing, Oklahoma storage hub and in the US Gulf Coast.

These high stockpiles and increasing production have limited the rally according to traders, but stock draws are expected soon as the summer driving season kicks in.

Tariq Zahir, an analyst at Tyche Capital Advisors told Reuters “U.S. shale is going to continue to weigh on market. With refineries coming out of maintenance season, maybe we’ll see some real strength around here soon.”