There's been a lot of debate lately about the future of oil prices. With a steady chorus of observers suggesting that crude must fall--as indicated by backwardation in futures curves globally.
But late last week we got news of another x-factor in this market. One that all oil investors should be watching closely.
That came from major global producer Libya. Where the country's national oil company said it may be halting oil exports completely.
The move comes as Libya is struggling to maintain crude supply. Following fighting between government forces and rebel groups that has disrupted output across the country.
That continues to be a thorny issue--with Libya's overall production dropping to a multi-year low of 238,000 barrel per day in April. Down from an average of nearly 1.4 million barrels per day during 2012.
Faced with this supply pinch, officials said they may now have to divert crude from two offshore fields in order to meet domestic demand. Which would likely leave almost no volumes for export.
This would be somewhat of an about-face for the oil market. Which had lately been anticipating growing Libyan exports. After the country was able to restart shipments from key ports for the first time in months.
But the prospect of increased supply from this major production center has now fizzled. Which may put more pressure on crude prices than some analysts are expecting.
That's not going to change anytime soon--with production figures in Libya are still continuing to drop, nearly monthly. Indicating that this supply source will be more or less gone from the global market for the foreseeable future.
Something to keep in mind as we consider our bets on the oil sector.
Here's to keeping it at home,
By Dave Forest
Dave is Managing Geologist of the Pierce Points Daily E-Letter. More