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.
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.