Oil rescued from price lows by Libyan supply disruption

Bloomberg

West Texas Intermediate for April delivery lost 65 cents to settle at $60.71/bbl on the New York Mercantile Exchange. The US government expects major shale regions to boost output by 131 000 barrels a day in April, spurring fears that surging supplies will undermine Organisation of Petroleum Exporting Countries (OPEC)'s efforts to clear a glut.

"Rising production and inventory in the U.S. has been reducing fund sentiment since it peaked at the end of January", ING said. "We have monthly reports from the International Energy Agency and OPEC in the coming days to influence prices, but for now, crude is having a downbeat start to the week, unwinding some of Friday's effervescent rally".

As the rig count fell, "the market is starting to think that US shale oil production may not steadily grow, which is supporting oil prices", Takayuki Nogami, chief economist at state-backed Japan Oil, Gas & Metals National Corp., said by phone from Tokyo.

"Increasing output alone is a problem but, at the same time, we have American stockpiles rebounding, which may continue to challenge crude from recovering". The contract declined 68 cents to $61.36 on Monday.

Brent crude, the benchmark for more than half the world's oil, traded at $65.07 a barrel at 10:11 a.m.in London on Monday, compared with about $45 in June.

Crude oil futures are trading lower early Tuesday, extending its losses from the previous session. The global benchmark widened to a $3.89 premium to May WTI.

US production is also expected to rise above 11 million bpd by late 2018, taking the top spot from Russian Federation, according to the International Energy Agency (EIA). The Permian basin is seen leading the way with an 80,000/bbl increase.

Total American output has passed 10 million barrels a day, beating a record set in 1970.

Showing the lowest level since 2015, United States crude inventories dropped 1.1 million barrels in the week of January 19, according to the Energy Information Administration (EIA). Furthermore, the futures hub at Cushing, Oklahoma is also expected to show a build.

In Libya, the Zawiya oil terminal returned to normal operations late on Tuesday after workers who were blocking ships from docking ended a strike, two sources said. Gasoline futures in NY are down 0.2% at $1.8895 a gallon.

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