Oil falls to two-week low as Nigeria, Libya poised to swell glut

Higher output expected from Libya and Nigeria further fuel oversupply concerns

Last updated: September 15, 2018 | 18:54

3 MIN READ

London: World oil prices fell Friday as the prospects of higher output from Libya and Nigeria further fuelled oversupply concerns, cutting short a nascent rebound.

Both contracts rose Thursday on news that 6,000 barrels of gasoline had leaked from the Colonial pipeline that carries fuel from the Gulf Coast to the eastern United States.

The leak, however, was not enough to overshadow expectations that Libya and Nigeria are due to ramp up production.

WTI, Brent North Sea

By 1100 GMT (3am Dubai time), US benchmark West Texas Intermediate (WTI) for delivery in October had fallen 70 cents to $43.21 a barrel, reversing earlier gains.

Brent North Sea crude for November delivery lost 76 cents to $45.83 a barrel compared with the previous day's close.

WTI is down about five percent over the week while Brent has lost almost four percent in value.

Supply concerns

Jeffrey Halley, a senior market analyst at OANDA trading, said supply concerns are back "with Libya and Nigeria lifting force majeures and increasing crude shipments".

Libya's National Oil Corporation said this week it would double production within four weeks after it was handed control of crucial ports that had been seized by forces loyal to the country's rival administration.

At the same time, Nigeria — Africa's biggest crude producer — appears set to also increase its oil exports, traders said.

A persistent crude supply glut has hammered prices for more than two years as rival producers maintain high output levels in their fight for market share.

A meeting later this month in Algeria between Russia and the Organization of the Petroleum Exporting Countries is expected to touch on price stability, but analysts remain doubtful a deal can be reached to freeze or cut output.

Halley said that in the absence of comments ahead of that meeting "the street turns to the only real game in town — the (US Federal Reserve policy board) rate decision" next week.

Traders are keeping tabs on the gathering after conflicting comments the past week from Fed officials on the need for a hike in borrowing costs.

An interest rate hike will likely boost the greenback, making dollar-priced oil more expensive for holders of weaker currencies, hurting demand and prices.

Lowest in two weeks

Oil fell to the lowest intraday level in two weeks in New York on speculation that the resumption of supplies in Libya and Nigeria may compound the global crude surplus.

Futures fell 1.6 per cent in New York, extending a weekly decline to 5.8 per cent. Organisation of the Petroleum Exporting Countries (Opec) members Libya and Nigeria, whose supplies have been reduced by domestic conflicts, are preparing to boost exports within weeks.

The oil surplus will last longer than previously thought as demand growth slumps and output proves resilient, the International Energy Agency (IEA) said Tuesday.

Oil has fluctuated since rallying in August amid speculation the Opec and Russia would agree on measures to stabilise the market at a meeting in Algiers later this month.

All 14 member countries will attend the September 27 meeting, according to an official with knowledge of the plans.

“Oil prices keep trading in a narrow range,” said Michael Poulsen, an analyst at Global Risk Management Ltd. “A short spike yesterday is erased this morning as supply glut worries rule.”

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