Crude oil started the week with gains thanks to comments from Saudi Arabia’s Energy Minister Khalid al-Falih and reports of a slowdown in exports from Libya’s Mellitah oil terminal.
WTI was trading at US$63.63 a barrel at the time of writing and Brent crude was changing hands at US$66.98, after on Saturday Al-Falih said that Saudi Arabia’s oil production over the first three months of 2018 would be much lower than the amount allowed under the 2016 production cut agreement. Al-Falih added that exports were estimated to average 7 million bpd in the three-month period.
At the same time, the minister said he hoped OPEC and its partners could relax the production restrictions in 2019 and progress on the permanent cooperation framework that was mentioned earlier this year.
Following these comments, Brent crude briefly jumped over US$67 a barrel, but later in the day eased down again. U.S. production, near record highs, put a cap on the gains.
Meanwhile, protests at the El Feel field in Libya have led to the introduction of a force majeure at the 90,000-bpd field, affecting exports from Mellitah. The National Oil Corporation said in a statement that loadings at Mellitah will be “modified” in accordance with events at El Feel. Related: How The Fed Could Hammer Oil Producers
Oilfield guards are protesting against low pay and the lack of additional benefits. NOC’s chairman Mustafa Sanalla, however, said that the guards are under the authority of the Ministry of Defense, so it should be the one responsible for their compensation.
Libya is producing around 1.1 million bpd currently, and disruptions in its production are widely seen as one of the strongest tailwinds for oil prices at the moment. The political situation in the North African country is still very fragile and volatile, which makes production outages likely in the coming months and perhaps years.
By Irina Slav for Oilprice.com
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Mr Al Falih is trying to tell the global oil market that Saudi Arabia will take any measure to support oil prices and that the OPEC/non-OPEC production cut agreement will continue in 2019 in a format which reflects the changing market conditions in terms of rising oil prices and a re-balanced market.
Oil prices are heading towards $70/barrel and could even touch $75 in 2018. $60 will be a floor for oil prices in 2018. And while US shale oil production will try to cap oil prices at $70, they will fail as they did when they tried to cap the price at $60 in 2017.
The global oil market is the most robust since the 2014 oil crash and the projections are that it will continue to be as robust in 2019 and 2020 with oil prices probably reaching $80 in 2019 and $100 or even higher in 2020.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London