Oil prices fall on concerns of oversupply as Libyan output recovers
SINGAPORE (Reuters) – Oil prices fell on Wednesday, weighed down by concerns of oversupply as Libyan output improves and as U.S. gasoline inventories rose despite the peak summer driving season.
Brent crude futures, the international benchmark for oil prices, were at $51.75 per barrel at 0415 GMT, down 12 cents, or 0.2 percent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures were at $47.72 a barrel, down 11 cents, or 0.2 percent.
Libya’s Sharara oil field, the country’s largest, was gradually restarting on Tuesday after a shutdown.
Sharara recently reached output of 280,000 barrels per day (bpd), but closed earlier this month due to a pipeline blockade. Its production is key to Libya’s oil output, which surged above 1 million bpd in late June, about four times its level last summer.
Libya’s rising output is a headache for the Organization of the Petroleum Exporting Countries (OPEC), which together with non-OPEC producers including Russia has pledged to hold back around 1.8 million bpd of supplies between January this year and March 2018 to tighten supplies.
However, OPEC has so far fallen short off its pledge, in part due to Libya’s strong output. The OPEC-member has been exempt from cuts.
“Sentiment towards oil remains bearish amid oversupply fears and the possible threat of OPEC’s supply cut deal falling apart,” said Lukman Otunuga, analyst at futures brokerage FXTM.
The next meeting of a ministerial committee of OPEC and non-OPEC states to discuss their production pact has been proposed for Sept. 22.
In the United States, crude inventories fell by 3.6 million barrels in the week to Aug. 18 to 465.6 million, industry group the American Petroleum Institute said Tuesday. However, gasoline stocks rose by 1.4 million barrels, compared with analyst expectations in a Reuters poll for a 643,000-barrel decline.
Jeffrey Halley, senior market analyst at futures brokerage OANDA said that the rising U.S. gasoline inventories were “not a good sign during the U.S. summer driving season” during which fuel demand tends to be high.
Official inventory data by the U.S. Energy Information Administration is due to be released late on Wednesday.
Meanwhile, Bernstein Research warned that low prices and ample supplies were resulting in low oil industry investment levels.
“We see (oil and gas)… order intake activity at almost the same low level as in 2016 … For now, we remind investors that contract levels appear to still be insufficient to drive recovery in earnings,” it said.
Reporting by Henning Gloystein; Editing by Kenneth Maxwell and Joseph Radford