Oil Prices Rise on Libyan and Canadian Crude Problems

Oil prices edged higher on Tuesday, as crude troubles in Libya and Canada strengthened prices, although the Organization of the Petroleum Exporting Countries’ (OPEC) weekend agreement and trade tensions between the US, China, and the European Union (EU) put the commodity under pressure.

International benchmark Brent crude futures for September delivery fell 0.5 percent to $74.13 per barrel, while West Texas Intermediate (WTI) crude futures for the August contract added 0.1 percent to $68.20 per barrel.

Libyan Oil Supply Uncertain, Canada Experiences Production Losses

The rebound in prices came after forces of eastern Libyan commander Khalifa Haftar decided to hand over marketing rights of oil ports to eastern-based National Oil Corporation (NOC), which is considered by the international NOC in Tripoli to be illegal.

Analysts at a German bank said the move could deter international customers, who usually go through NOC Tripoli, from buying Libyan oil.

An attempt to sidestep the NOC when selling Libyan oil had already failed in 2015, because there were no interested buyers, according to the analysts, adding that prices are unlikely to drop noticeably, if the situation remains unresolved, which will likely leave the market with less amount of Libyan oil.

Director of an energy consultancy firm Sukrit Vijayakar stated that the decision raises the risk of crude supply in Libya being shut in, since the Tripoli-based NOC is the only legal entity entitled to sell oil.

Elsewhere, output problems due to a temporary shutdown at one of the biggest oil-sands facilities in Canada also helped bolster prices. The facility produces 360,000 barrels per day (bpd).

OPEC Output Deal, Global Trade Tensions Escalate Further

The gains also follow a decline in Brent, triggered by last week’s agreement by the OPEC and other producers to lift supply by 1 million bpd in the second half of the year.

Oil markets have kept a tight hold on production since last year, when the OPEC and its allies began to curb output to increase falling crude prices.

Still, some analysts believed that the markets will not loosen their grip. Senior oil and gas analyst Jason Gammel said they see tight supply as a driver of prices during this year.

Brent is expected to climb to $90 per barrel by the second quarter of 2019, according to investment firm Bank of America Merrill Lynch (BoAML).

However, the bank cautioned that the results of the escalating global trade conflict between the US and China, as well as other significant economies, including the EU were gradually materializing, seeing the sharp sell-offs in stock markets, especially in Asia.

BoAML forecasts demand to slip 44,000 bpd for each 1 percent loss in global trade.

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