Oil Rebounds From Five-Year Low as Fighting Curbs OPEC Supplies
Fighting stopped exports from Libya’s largest and third-largest crude ports and halted some fields, state-run National Oil Corp said. Workers at Nigerian oil platforms and shipping terminals began an indefinite strike that will soon affect production, according to a union spokesman. OPEC won’t cut output even if prices fall as low as $40 a barrel, U.A.E. Energy Minister Suhail Al-Mazrouei said.
Oil fell into a bear market this year amid the highest U.S. production in three decades and slowing growth in global consumption. Prices have fallen about 20 percent to the lowest in five years since the Organization of Petroleum Exporting Countries decided at a Nov. 27 meeting not to cut production to tackle the glut. The group has pumped more than its output target of 30 million barrels a day for the last six months.
“Libya may have helped the market stay above $60,” Christopher Bellew, senior broker at Jefferies International Ltd. in London, said by e-mail. “Maybe some optimists think that $60 marks the bottom of the market, but I can see nothing to support that theory.”
Brent for January settlement gained as much as $1.40, or 2.3 percent, to $63.25 a barrel on the London-based ICE Futures Europe exchange and traded at $62.43 at 2:04 p.m. local time. The European benchmark earlier slumped 2.5 percent to $60.28, the lowest since July 2009.
OPEC Production
West Texas Intermediate for January delivery fell 14 cents, or 0.2 percent, to $57.67 a barrel on the New York Mercantile Exchange. The U.S. benchmark was at a discount of $4.78 a barrel to Brent on ICE.
OPEC pumped 30.05 million barrels a day in November, according to data from analysts and media organizations compiled by the group in a report Dec. 10. That’s 1.73 million barrels a day more crude than the world needs from the exporters in the first quarter, according to its own estimates.
OPEC will stand by its decision not to cut output, the U.A.E.’s Al-Mazrouei told Bloomberg yesterday at a conference in Dubai. The group will wait at least three months before considering an emergency meeting to discuss output again, he said.
“We are not going to change our minds because the prices went to $60 or to $40,” Mazrouei said.“The market will stabilize itself.”
Force Majeure
Libya and Nigeria together produced 2.57 million barrels a day of crude oil last month, according to the OPEC report. The countries were among eight OPEC members who supported an output reduction on Nov. 27, according to five people briefed on the meeting.
Libya’s output dropped “significantly,” said National Oil Corp. spokesman Mohamed Elharari, without being more specific. NOC declared force majeure, which excuses a supplier from meeting its delivery commitments because of events beyond its control, at the ports of Es Sider and Ras Lanuf on Dec. 13. Output will be halted at some oil fields because of armed clashes nearby, it said.
The North African country is divided after its internationally recognized government, led by Abdullah al-Thinni, sought refuge in the country’s east after Islamist militias took over Tripoli in July. Islamist forces attempted to invade the ports over the weekend and were repulsed, Ali Al-Hasy, a spokesman for the Petroleum Facilities Guard, a force loyal to Thinni’s government, said by phone from Es Sider.
Islamist Forces
Libya’s largest oil field, Sharara, was seized by a group loyal to the Islamists last month. The country produced 580,000 barrels a day of crude in November, down from 850,000 in October, according to data compiled by Bloomberg. Output is now 350,000 barrels a day, said two people with direct knowledge of the matter, who asked not to be identified because they are not authorized to speak to the media.
While the fall in Libyan production “may help keep the market from experiencing near-term surpluses, the temporary nature of it doesn’t help solve the longer-term imbalances,” Goldman Sachs Group Inc. said in a report today.
Nigerian oil workers’ unions Pengassan and Nupeng, who are demanding changes to the country’s oil industry, instructed members to stop all work at facilities including oil platforms and export terminals.
“You will soon begin to see shutdowns of our oil flow,” Emmanuel Ojugbana, a spokesman of the Petroleum and Natural Gas Senior Staff Association of Nigeria, said by phone from Warri, a southern oil hub. “If the strike is allowed for another few days, I can assure you that there will be complete shutdown.”
The strike will not disrupt domestic fuel supplies, Ohi Alegbe, an Abuja-based spokesman for the Nigerian National Petroleum Corp. and the Oil Ministry, said by e-mail.
Negative Effects
Nigeria, the largest producer in Africa, pumped 2.18 million barrels a day last month, according to data compiled by Bloomberg. It gets 95 percent of its export earnings and 70 percent of government revenues from oil. Rates on the country’s bonds due July 2023 rose to an all-time high of 7.36 percent Dec. 12.
OPEC decided last month to keep output unchanged to protect the group’s market share, even if it has a negative effect on crude prices, the official Kuwait News Agency reported yesterday, citing Oil Minister Ali al-Omair.
An increase of about 6 million barrels a day in non-OPEC supply, from countries including the U.S. and Russia, together with speculation in oil markets triggered the recent drop in prices, OPEC Secretary-General Abdalla El-Badri said yesterday at the Dubai conference.
“It’s not logical nor fair to ask OPEC to reduce their production and not ask the other producers to stop their expected growth in supply,” Mazrouei said today on Twitter.
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