In the U.S. trading on Tuesday, oil prices continued their earlier decline, falling more than 3% during the day, amid news that Libya's political factions were close to reaching an agreement.
After the news came out, WTI crude oil fell nearly 4% during the day and approached the $70 mark; Brent crude oil fell below $75, wiping out all gains this year.
Libya's Central Bank Governor Sadiq Al-Kabir said on Tuesday there were "strong" signs that political factions were close to reaching an agreement to break the current deadlock. Reconciliation between Libya's various government factions would pave the way for more than 500,000 barrels per day of oil supply to return to global markets.
Kabir, who was ousted by a western government that prompted eastern authorities to cut crude oil production, fled Libya after being threatened by armed groups, but said in an interview in Istanbul, Turkey, that he believes he will be part of any solution and is ready to return to Libya. "If they sign the agreement today, I will come back tomorrow," he said.
It is unclear whether Libya's internationally recognized western government will agree to Kabir's return. Before the August 26 suspension order, Libya's daily oil production was about 1 million barrels, mostly from the east. Over the past week, daily production has plummeted to about 450,000 barrels.
Earlier, six engineers revealed that oil exports from Libya's main port had stopped on Monday and oil production across the country had also been reduced. UBS analyst Giovanni Staunovo said that due to the uncertainty of the duration of Libya's production disruption, the current large-scale production disruption in Libya has limited support for rising oil prices.
Libya’s National Oil Corporation said total production had fallen to just over 591,000 barrels per day as of Aug. 28, from nearly 959,000 barrels per day on Aug. 26. The company said output on July 20 was about 1.28 million barrels per day.
Some supply will return to the market as OPEC+ plans to increase output by 180,000 bpd in October, a plan that industry sources said was likely to go ahead regardless of demand concerns.
However, OPEC+ made it clear in June that it could reverse its production increase plan depending on market conditions. Helima Croft, head of global commodity strategy at RBC Capital Markets, told clients on Monday that given the slowdown in Asian demand, OPEC+'s best course of action would be to wait until December to restore production. Panmure Liberum analyst Ashley Kelty said:
“It is unclear how low oil prices can fall before OPEC+ reacts, as most cartel members need prices above current levels to get close to budget balance.”
The article is forwarded from: Jinshi Data