WTI Crude Oil looks to be heading below the $100 price level, giving up 14 cents this morning to trade at 100.70 after touching a high over the $107 level at the beginning of the violence in Iraq. Brent Oil rebounded a bit this morning gaining 18 cents after plummeting on Friday. Brent oil is trading at 107.45 at a seasonal low gaining 18 cents in the Asian session. Brent crude traded near the lowest price in three months as Libya’s oil output continued to increase, easing the threat of supply disruptions from the Middle East.
West Texas Intermediate was steady in New York. Brent for August settlement was at $106.75 a barrel on the London-based ICE Futures Europe exchange, up 9 cents, at 12:28 p.m. Singapore time. The contract dropped $2.01 to $106.66 on July 11, the lowest close since April 7. The volume of all futures traded was about 83 percent above the 100-day average. Prices are down 3.7 percent this year. “The petroleum markets are under ongoing selling pressure as traders react to the decline in price by selling more, even in the absence of fresh compelling bearish news,” said Tim Evans of Citi Futures.
Libyan production has been severely limited for a year now, after rebels blockaded terminals as part of a campaign to restore autonomy in the country’s eastern region. The ports at Ras Lanuf and Al-Sidra could add about 500,000 barrels of crude per day to global energy markets, analysts say. Output in Sharara, the site of Libya’s largest oil field, is reaching its maximum production capacity of 340,000 barrels, just days after it reopened following a deal between rebels and the government, The Wall Street Journal reported.
Unaffected production in violence-hit Iraq has also had a bearish impact on oil prices. Indications that Iraqi oil exports from the southern part of the country remained insulated from the sectarian violence that has swept the north in recent weeks also weighed down prices.
Reports showed that, OPEC crude output (including Iraq) reached 30.7 mb/d, increasing by 0.25 mb/d, or 0.8 percent m/m, from April, according to data obtained through direct communication. This is the second consecutive month that OPEC production has increased since a 12-month low was witnessed in February. The largest month-on-month production increases were recorded by the United Arab Emirates, Iraq and Saudi Arabia: 9.2 percent, 3.7 percent and 0.5 percent, respectively.
In contrast, declines in output were observed, notably, in Kuwait, Nigeria and Libya. Libya’s oil production dropped to a two-and-a-half year low of 217,000 b/d in May as the country continued to reel from a combination of strikes and blockades by rebel groups. 85 percent of Libya’s pre-Gaddafi-era oil output has been shut-in over the last year or so.
The United States is drowning in oil and gas. But processing the new-found bounty is posing a challenge to U.S. refiners, which can’t come to grips with the abundance in domestic supply. A production renaissance has catapulted the United States into the upper strata of global energy producers. Yet with fewer than 150 refineries, the U.S. has a surprisingly limited capacity to process the bounty. Over the years, refineries spent billions to process denser oil –only to be caught flatfooted by the shale boom that has made light, sweet crude so plentiful. Analysts say they’ve been slow to make new upgrades that can better process shale.
US Natural Gas production has also steadily increased due to the newer technologies. Combining higher production with a cooler summer demand is weighing on prices. Natural gas continues to seek a bottom trading at 4.129 down by 12 point this morning after the severe winter saw prices top the $6.00 price.