Supported by outages in Libya and concerns about the loss of some Russian supply, oil rose early on Monday after a long weekend, returning to the levels last seen at the end of March, just before the United States announced its largest-ever release of strategic crude stocks to curb rising crude and gasoline prices.
As of 9:45 a.m. ET on Monday, WTI Crude was up by 0.92% at $107.86, and Brent Crude had risen by 0.98% at $112.75.
The front-month prices of both benchmarks have now returned to the levels they were trading at just before the March 31 announcement from the White House that the Biden Administration would release 180 million barrels of oil from the Strategic Petroleum Reserve (SPR) over six months “to respond to Putin’s price hike at the pump.”
“After consultation with allies and partners, the President will announce the largest release of oil reserves in history, putting one million additional barrels on the market per day on average – every day – for the next six months,” the White House said at the time.
The news of the massive SPR release sent oil prices lower for several days in early April. However, analysts say that the emergency stocks release would do nothing to fill the structural deficit in the oil market after years of low investments in new production.
Recent reports of the EU discussing a Russian oil embargo and this weekend’s outages in Libya pushed oil higher, trumping the SPR release and concerns about a slowdown in demand in China as it is back in lockdown mode for millions of residents as part of its “zero COVID” policy.
While fears of a slowdown in the world’s top crude oil importer dominated market sentiment earlier this month, Libyan outages tipped the mood to slightly bullish early on Monday. Libya’s largest oilfield, Sharara, has shut down production after a group of individuals pressured oil workers, the National Oil Corporation (NOC) said, declaring force majeure on the oilfield. This followed the forced closure of the Al-Feel field on Saturday, which forced NOC to declare force majeure on the oil port of Zueitina. NOC also “warns of the start of a painful wave of closures at the time of the oil and gas price boom.”
By Tsvetana Paraskova for Oilprice.com
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It also confirms that there is no one single oil producer or a group of producers including OPEC+ and US shale oil that can replace Russian oil and products exports of 8.0 million barrels a day (mbd) now or for the foreseeable future.
In the current tight market any reports about outages in Libya or concerns about the loss of some Russian supply or a slowdown in China’s oil demand because of COVID-related issues cause prices to surge.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London