Oil prices helped by strong Asian demand
In Monday trading, oil prices dropped by pennies as traders weighed the return of Libyan production against upbeat economic news from Asia that showed a strong economy could fuel a healthy demand for energy.
Brent futures dropped by 41 cents, ending up at $53.12/barrel and US WTI crude futures were down 36 cents to $50.24/barrel.
Reuters reports Libya’s Sharara oilfield, the country’s largest, resumed production on Sunday after a week-long disruption due to protests. On Monday, state-owned National Oil Corporation lifted the force majeure on Sharara crude loadings.
The Sharara field was producing about 120,000 b/d, down from the 220,000 b/d prior to the shutdown on March 27.
“The main development over the weekend is the restart of Sharara,” managing director of PetroMatrix Olivier Jakob told Reutuers.
Jakob added that uncertainty about the dependability of Libyan output added short-term volatility to oil prices. “(It) is a swing factor that can make it move both ways if one looks at the balances for the second half of the year.” he added.
On Friday, Baker Hughes reported another increase in the US rig count, up by 10 to 662. According to the report, Q1 2017 is the strongest quarter for rig additions since mid-2011.
The rising US shale output along with the Libyan recovery tempered manufacturing data from Asia showing the area’s strong growth in March, which would trigger a strong demand for energy.
According to data from the purchasing managers’ index in China, factories expanded for a ninth straight month in March, but the pace has slipped following a slow down in new export orders.
“The China PMI figures were pretty positive. They provide background support for oil prices,” according to the chief market analyst at Sydney’s CMC Markets Spooner.
In a note to clients, Tim Evans, Citi Futures’ energy futures specialist said “The global economy remains on track for continuing growth in 2017, a support for the demand side of the petroleum market.”
Last week, oil prices rallied for three days on disruption of Libyan output and expectations that OPEC would extend its supply cut pact to the end of the year.
But, according to Reuters, in a sign of investor caution, hedge funds and money managers have been cutting net long positions, data released by the Intercontinental Exchange and the U.S. Commodity Futures Trading Commission showed.
“Excess speculative froth has been taken off the market in allowing fresh buying interest to be more impactful,” said Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates.
