Oil prices fall on rebound in Libya’s Sharara field production

Oil prices dropped in trading on Monday on investor concerns about the global crude glut. Pioneer Natural Resources photo.

Oil prices dip in seesaw trading

Oil prices fell as much as 2 per cent in seesaw trading on Monday on increased production from Libya’s Sharara oil field and concerns about higher US and OPEC output.

After dropping as low as $51.37/barrel, Brent crude futures were at $52.16/barrel by 2:05 p.m. EDT and US crude futures fell by 34 cents to $49.24/barrel after reaching session lows of $48.54/barrel.

According to Reuters, crude output from Libya’s largest oil field is returning to normal after armed protesters caused a brief disruption in a coastal city called Zawiya.  Since late June, Libya’s production has risen to over 1 million barrels per day (b/d).

In July, OPEC hit a 2017 record high for output and exports.  Analysts and investors are now more doubtful about the effectiveness of the OPEC supply cut pact.

“The petroleum markets are tipping toward the lower end of their recent trading range as oil producers meeting in Abu Dhabi have been slow to assure the market that compliance with this year’s production cuts will be improved, although we continue to note that adherence to the limits has actually been quite strong by historical standards,” Tim Evans, Citi Futures’ energy futures specialist told Reuters.

“The recent increase in OPEC production has mostly been a function of recovering volumes from Libya and Nigeria.”

On Monday and Tuesday, a joint OPEC and non-OPEC technical committee will meet in Abu Dhabi to discuss ways to boost compliance with the OPEC deal.

In the United States, crude production remains high, but Baker Hughes data released on Friday showed the rig count fell by one in the week ending Aug. 4.

In the week ending July 28, US weekly oil production hit 9.43 million b/d, the highest since August 2015.  Morgan Stanley said in a note it expects US oil production to grow by 900,000 b/d in the fourth quarter against 2016.  It had previously forecast the increase to be 860,000 b/d.

On the demand side, Goldman Sachs says it anticipates continued strong growth, driven by strong economic growth.