Oil prices started the month of July rising by 2% early on Friday, rebounding from Thursday’s losses after Libya declared force majeure on more crude export terminals, adding further concerns over tight global supply.
Oil rebounded at the start of July after losing 9% in the month of June—the first loss in eight months. The aggressive interest rate hikes from the Fed and other central banks last month had the global markets – including the commodities markets and equities – worried that the sharp rise in key rates would lead to a recession in the near future.
The reopening in fits and starts for Shanghai and other Chinese cities with the “zero COVID” policy approach also weighed on oil prices last month.
As July began, market participants turned to the supply picture and outages there are boosting the bulls’ case.
On top of supply losses from Russia, and OPEC and OPEC+ failing to pump to targets, Libya—the perennial wild card—declared force majeure on the oil export terminals of Sidra and Ras Lanuf, in addition to the Al-Feel field, while the Brega and Zueitina oil ports continue to be under force majeure. Libya’s exports have recently ranged from 365,000 barrels per day (bpd) to 409,000 bpd, which is a decrease of 865,000 bpd compared to “normal production rates under normal circumstances,” the National Oil Corporation (NOC) said.
Commenting on oil’s moves in the coming weeks, Saxo Bank’s Strategy Team said on Friday: “Following a dismal end to the first half, many investors will in the short-term focus mostly on reducing exposure before heading on a much-needed summer vacation.”
“With this in the mind, traders with a macroeconomic focus selling “paper” oil through futures as a hedge against recession may have the upper hand against the physical market where price supportive tightness remains,” the bank’s strategists said.
By Charles Kennedy for Oilprice.com
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