Oil prices have fallen as markets expect Libya’s production to return to normal after the declaration of a force majeure.
According to Reuters, Brent crude futures were down $0.56 at $64.64 per barrel. US West Texas Intermediate (WTI) crude was down $0.35 at $58.19 a barrel.
OANDA market analyst Edward Moya said: “The situation in Libya provided oil prices an early boost but the rally fizzled out as expectations remain that Libya’s oil production will eventually return to normal levels.”
The National Oil Corporation (NOC) of Libya said that forces loyal to military commander Khalifa Haftar closed a pipeline. This forced two oilfields in the southwest region of the country to shut.
Libya’s NOC declared force majeure on crude loadings from the Sharara and El Feel oilfields. Reuters reported this according to a document sent to traders.
Reuters cited an NOC spokesman as saying that storage tanks will fill within days. The spokesman said production will slow to 72,000 barrels per day (bpd) if Libyan exports cease for any length of time.
Recently, Libya’s production rate has reached approximately 1.2Mbpd.
Mitsubishi Tokyo oil risk manager Tony Nunan said: “Every time we get a big geopolitical event, the market spikes up but everybody looks at that as a chance of a selling opportunity.”
“We are caught in this ($65 per barrel) trading range. Anything below and OPEC is going to have a tough time balancing their budgets … and anything above, shale (output) will rebound.”