Oil hits highest levels in more than a week after Libyan plants start closing

The Philadelphia Energy Solutions oil refinery. Picture: REUTERS
The Philadelphia Energy Solutions oil refinery. Picture: REUTERS

Oil prices rose to their highest in more than week on Monday after two large crude production bases in Libya began shutting down amid a military blockade, setting the stage for crude flows from the Opec member to be cut to a trickle.

Brent crude futures were up 74c, or 1.1%, to $65.59 by 5.31am, having earlier reached $66.00 a barrel, the highest since January 9.

The West Texas Intermediate contract was up 58c, or 1%, at $59.12 a barrel, after rising to $59.73, the highest since January 10.

In the latest development in a long-running conflict in Libya, where two rival factions have claimed the right to rule the country for more than five years, the National Oil Corporation (NOC) said on Sunday two big oilfields in the southwest began shutting down after forces loyal to the Libyan National Army closed a pipeline.

“If this sort of disruption endures, it’s meaningful … the market is right to be reacting with a bullish tone,” said Lachlan Shaw, head of commodity research, at National Australia Bank in Melbourne.

“It just continues to emphasise, notwithstanding that the world market is clearly in surplus and there are plenty of stocks, the fact is the market still depends on a number of key regions that have heightened geopolitical risk.”

Oil prices had fallen back in the last two weeks. After the outbreak of hostilities between the US and Iran at the beginning of the year triggered a jump, both sides took steps to pull back from conflict, calming the market’s mood.

If exports are halted for any sustained period, tanks for storage will fill within days and production will slow to 72,000 barrels per day (bpd), an NOC spokesperson said. Libya has been producing about 1.2-million bpd recently.

Also on Sunday, foreign countries agreed at a summit in Berlin to shore up a shaky truce in Libya, even as the talks were overshadowed by the latest blockade.

German Chancellor Angela Merkel told reporters that the Berlin summit, attended by the main backers of the rival Libyan factions, have agreed that a tentative truce in Tripoli over the past week should be turned into a permanent ceasefire to allow a political process to take place.

Reuters

X