Oil prices surge higher as Libya began shutting down amid military blockade – Analysts

Analysts on Monday said oil prices surge higher in more then a week after two large crude production bases in Libya began shutting down amid a military blockade, setting the stage for crude flows from the Organisation of Petrol Petroleum Exporting Countries (OPEC) member to be cut to a trickle.

Brent crude futures were up by  1.1 per cent, to $65.59 having earlier reached $66.00 a barrel, the highest since Jan. 9 and the West Texas Intermediate  contract was up by 1%  to $59.12 a barrel, after rising to $59.73, the highest since Jan. 10.

Analyst revealed that, in the latest development in a long-running conflict in Libya, where two rival factions have claimed the right to rule the country for more than five years, the National Oil Corporation (NOC) on Sunday said, two big oilfields in the southwest had begun shutting down after forces loyal to the Libyan National Army closed a pipeline.

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They stressed that, if the sort of disruption endures, it’s meaningful and the market is right to be reacting with a bullish tone. 

“It just continues to emphasise, notwithstanding that the world market is clearly in surplus and there are plenty of stocks, the fact is the market still depends on a number of key regions that have heightened geopolitical risk” Analysts averred. 

A NOC spokesman emphasised that, if exports are halted for any sustained period, tanks for storage will fill within days and production will slow to 72,000 barrels per day (bpd). 

Also on Sunday, foreign countries agreed at a summit in Berlin to shore up a shaky truce in Libya, even as the talks were overshadowed by the latest blockade.

German Chancellor Angela Merkel told reporters that the Berlin summit, attended by the main backers of the rival Libyan factions had agreed that a tentative truce in Tripoli over the past week should be turned into a permanent ceasefire to allow a political process to take place.

The Daily Times gathered that oil prices had fallen back in the last two weeks after the outbreak of hostilities between the United States and Iran at the beginning of the year triggered a jump, both sides took steps to pull back from conflict, calming the market’s mood.