Oil trades near highest since mid-2015 on Libya pipeline blast

Explosion at pipeline carrying crude to Libya’s biggest export terminal curbed production

Oil traded near the highest close in more than two years after an explosion at a pipeline carrying crude to Libya’s biggest export terminal . AFP

Oil traded near the highest close in more than two years after an explosion at a pipeline carrying crude to Libya’s biggest export terminal curbed the Opec nation’s production.

Futures were little changed in New York after rising 2.6 per cent on Tuesday and breaching $60 a barrel for the first time since June 2015. A pipeline run by Waha Oil Company that carries crude to Libya’s Es Sider terminal exploded Tuesday, reducing output by 70,000-100,000 barrels a day. Meanwhile, Saudi Arabia is said to expect oil revenue to jump about 80 per cent by 2023 to help the kingdom record its first budget surplus in a decade.

Oil is heading for a second yearly advance as the Opec  countries and their allies including Russia prolong supply curbs through the end of 2018. Prices gained this month after a separate pipe in the UK -- one of the most important conduits in the world -- was shut because of a crack. Partial flows have now restarted at the Forties Pipeline System’s Kinneil facility, operator Ineos Group said.

“The pipeline explosion in Libya is a lot more serious as it may take a long time to restore, which can be a long-term driver of oil prices,” Kim Kwangrae, a commodities analyst at Samsung Futures in Seoul. “The disruption is considered detrimental enough to dry up some of the global glut.”

West Texas Intermediate for February delivery was at US$59.75 a barrel on the New York Mercantile Exchange, down 22 cents, at 2:13pm in Seoul. Total volume traded was about 53 per cent below the 100-day average. Futures rose to as high as $60.01 a barrel in the previous session. At the settlement on Tuesday, they gained $1.50 to $59.97.

Brent for February settlement lost 29 cents to $66.73 a barrel on the London-based ICE Futures Europe exchange. Prices climbed $1.77, or 2.7 per cent, to $67.02 a barrel Tuesday, the highest close since May 2015. The global benchmark crude traded at a premium of $6.98 to WTI.

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Output in Libya, where oil fields have endured sporadic shutdowns and disruptions due to protests, power blackouts and fighting, rose to about 1 million barrels a day this year, the highest level in four years. Any drop in production due to the blast that occurred 130 kilometres south of Sidra will ease pressure on Opec-led efforts to drain a inventory glut.

Under a six-year program to balance the budget, officials predict rising prices and expanded output will push Saudi Arabia’s income from oil sales to 801.4 billion riyals (US$214bn) from 440 billion riyals this year, said people with knowledge of the matter.

In the other oil market reports US crude production is set to surpass 10.5 million barrels a day by the end of next year because of the growth in the Permian “super” Basin, Reed Olmstead, director for energy research and analysis at IHS Markit, said in a note.