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Oil rises further above $55 on Libyan field shutdown, Syria

Published 04/10/2017, 06:02 AM
© Reuters. A motorist holds a fuel pump at a Gulf petrol station in London
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By Alex Lawler

LONDON (Reuters) - Oil rose further above $55 a barrel on Monday, supported by another shutdown at Libya's largest oilfield and heightened tension over Syria following the U.S. missile strike.

Libya's Sharara oilfield was shut on Sunday after a group blocked a pipeline linking it to an oil terminal, a Libyan oil source said. The field had only just returned to production, after a week-long stoppage ending in early April.

"It means that at least one potential source of additional supply has fallen away for the time being," said Carsten Fritsch of Commerzbank (DE:CBKG), referring to the Libyan outage.

Brent crude (LCOc1), the global benchmark, rose 48 cents to $55.72 at 0947 GMT, not far from the one-month high of $56.08 reached on Friday. U.S. crude (CLc1) was up 37 cents at $52.61.

Oil also climbed on heightened tension in the Middle East, a region that is home to more than a quarter of the world's oil output. Crude rallied last week after the United States fired missiles at a Syrian government air base.

"The developments in Syria should be factored in as an additional risk premium in the oil price going forward, especially now that oil inventories are drawing down and the market is no longer in massive surplus," said Bjarne Schieldrop, analyst at SEB.

He expects Brent average $57.50 in the second quarter, "which means we are likely to see $60 printed at times during this period."

Libya's Sharara field was previously shut for a week until April 2. The OPEC state has been pumping a fraction of potential output for most of the time since the 2011 civil war because of conflict and unrest.

Oil prices have also been supported by a deal led by the Organization of the Petroleum Exporting Countries to cut output by 1.8 million barrels per day for the first six months of 2017. Libya, and another OPEC member Nigeria, are exempt from cuts.

Last week's rise in prices was due to "the relatively high OPEC adherence to the supply cut agreement and the general belief that the deal will be extended and, secondly, because of geopolitical developments," Tamas Varga of oil broker PVM said.

However, the price rally has been limited, as oil price gains have encouraged production in other countries such as the United States, filling some of the gap left by OPEC-led cuts.

© Reuters. A motorist holds a fuel pump at a Gulf petrol station in London

U.S. drillers added oil rigs for a 12th straight week, Baker Hughes said on Friday, as energy companies boost spending on new production.

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