Oil drops towards $65 as Libya's biggest field restarts

El Sharara oilfield had been closed since December last year

Reuters March 05, 2019
El Sharara oilfield had been closed since December last year. PHOTO: REUTERS

LONDON: Oil fell towards $65 a barrel on Tuesday, pressured by the restart of Libya's biggest oilfield and on expectations for an increase in US crude inventories.

Some wells at Libya's El Sharara oilfield have restarted and the aim is to reach initial output of 80,000 barrels per day (bpd), a field engineer said on Tuesday. The field had been closed since December.

Brent crude, the international benchmark, fell $0.26 to $65.41 a barrel as of 1118 GMT. US West Texas Intermediate crude slipped $0.07 to $56.52.

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"The main development has been the restart of El Sharara," said Olivier Jakob, analyst at Petromatrix. "It's a new input which is on the bearish side."

Oil also slipped on forecasts that the latest round of US inventory reports will show rising crude stockpiles. Six analysts polled by Reuters estimated, on average, that crude stocks rose 400,000 barrels in the week to March 1.

The first supply report was due at 2130 GMT from the American Petroleum Institute (API), an industry group, followed by the government's official figures on Wednesday.

Concern about a slowdown in oil demand growth, especially in Europe and Asia, has weighed on prices. Still, Brent has risen 20% this year due to supply curbs led by the Organisation of the Petroleum Exporting Countries (OPEC).

China's government said it was targeting economic growth of 6-6.5% in 2019, less than 6.6% growth reported last year. That raises the prospect of slowing fuel demand in the world's second-largest consumer.

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"There are plenty of signs that the global economy is slowing - weak car sales and manufacturing data from China, flat growth in Europe and a slowing GDP rate in the fourth quarter for the US," said Matt Stanley, a broker at Starfuels, Dubai.

To prop up the market, OPEC and its allies, an alliance known as OPEC+, have been cutting output by 1.2 million bpd since the start of the year.

The actual cut has exceeded the pledged amount because of US sanctions on Iran and Venezuela, plus unrest in Libya that had prompted the closure of El Sharara, giving additional tailwind to prices.

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