The overnight rally in crude following API's unexpectedly large crude inventory drawdown has been erased as more headlines from Libya send WTI lower.
Bloomberg reports that output will be 900k b/d beginning next yr, NOC Chairman Mustafa Sanalla says in Cairo, and is expected to reach 1.2mm barrels per day by the end of 2017.
And the reaction is fear...
As Bloomberg Briefs details, Libya reopened two of its biggest oil fields and is set to load its first crude cargo in two years from its largest export terminal as the war-torn country pursues plans to almost double output in 2017.
Pipelines connecting the Sharara oil field to Zawiya refinery, and the El-Feel deposit to the Mellitah energy complex, reopened at the town of Rayayina, according to a statement by the state-run National Oil Corp. The reopening of the fields will help boost the country’s oil production by 175,000 barrels a day within one month and 270,000 barrels a day within three months, it said. Also, a tanker is set to load the first export from Es Sider oil port since the terminal was closed in 2014.
“I welcome the statement by the Rayayina Patrols Company of the Petroleum Facilities Guard, Western Branch, announcing lifting of the blockade on all the pipelines,” NOC Chairman Mustafa Sanalla said in the statement posted yesterday on the company’s website. “There were no payoffs and no backroom deals. For the first time in nearly three years, all our oil can flow freely. I hope this marks the end of the use of blockade tactics in our country.”
Libya’s comeback will put more pressure on OPEC and other major producers that agreed over the past three weeks to cut their output to rein in an oversupply and shore up prices. The North African nation, which was exempted from OPEC’s planned cuts because of its internal strife, is currently producing 600,000 barrels a day, less than half of the 1.6 million it pumped before a 2011 uprising.
“Anything that weighs on oil prices right now,” — whether it’s rising Libyan supply, a leap in the U.S. rig count, or the Federal Reserve’s interest-rate guidance for 2017 — “is a problem for OPEC,” Derek Brower, managing director of research at Petroleum Policy Intelligence, a U.K.-based consultant, said today by e-mail. “If the cuts don’t bring a sustained rally, then some producers will be tempted to push volume.”
Once again it seems the extreme sensitivity of algos to any shifts in production at all suggest faith in the OPEC/NOPEC 'cut' deal is anything but strong.