Brent crude oil rose towards US$110 per barrel on Tuesday after oil exports from Libya fell to their lowest for two years, heightening supply worries ahead of scheduled cuts in output from fellow OPEC member Iraq.
Striking security guards shut Libya’s two biggest crude export terminals on Monday, hours after they had reopened, and more oilfields have closed in a wave of protest that has swept the North African oil producer.
Libya’s deputy oil minister said exports could resume as early as Thursday after workers and local authorities reached an agreement to end the strike.
But markets worried supplies could be insufficient to meet demand due to restocking before the northern hemisphere winter.
“Supply issues are keeping the market on edge,” said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt.
Andrey Kryuchenkov, oil and commodities strategist at Russian bank VTB Capital agreed:
“We still lack any clarity on supplies from the North African producer. The supply shortfall in Libya will still keep a floor under London prices in the near future.”
Brent crude oil futures for September rose 70 cents to US$109.67 per barrel by 1150 GMT, while U.S. light crude oil was trading 35 cents higher at US$106.46.
Brent touched a low of US$107.43 a barrel on Monday, but rose back above its 200-day moving average at US$108.16, a technical marker watched by traders. Brent last traded above US$110 a barrel on Aug. 2.
“The volatile geopolitical climate in the (Middle East) region is going to keep prices supported as we go out into the fourth-quarter,” said Carl Larry, president of Houston-based consultancy Oil Outlooks and Opinions.
Libyan oil output has fallen to its lowest since the overthrow of Muammar Gaddafi, with the country’s total oil production well below 500,000 barrels per day (bpd), down from 1.3 million bpd in June, industry analysts say.
“We think Libyan production is down around 0.4 million bpd,” Richard Mallinson, chief policy analyst at London-based consultancy Energy Aspects, told Reuters Global Oil Forum. “Exports would be even lower at around 0.3 million bpd.”
Maintenance work at Iraq’s key southern oil export hub is expected to cut supplies by 500,000 bpd in September, lending further support to prices in the medium term.
Higher oil prices are already taking their toll on oil refiners in Europe, who are expected to cut their processing rates by around 500,000 bpd this week on poor profit margins.
