July 7, 2022

Oil prices rise as outages increase in Libya Russian supply concerns

Oil prices rise as outages increase in Libya Russian supply concerns

Stacks of a Total Grande Potts oil refinery seen just after sunset, southeast of Paris, France, March 1, 2021. REUTERS/Christian Hartmann

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  • The Libyan National Oil Corporation announces force majeure and warns against closing
  • China’s economy slowed in March
  • Russian oil production fell 7.5% in April so far – IFAX, citing a source

LONDON (Reuters) – Oil prices rose on Monday in volatile trade, with Brent crude above $112 a barrel, as outages in Libya deepened concern about tight global supply and the continuing Ukrainian crisis, offsetting concerns about slowing Chinese demand.

Adding to supply pressures from sanctions imposed on Russia, Libya’s National Oil Corporation warned on Monday that a “painful wave of closures” had begun to hit its facilities and declared a case of force majeure at the El Sharara oil field and other sites.

“With global supplies now tight, the slightest disruption is likely to have a significant impact on prices,” said Jeffrey Haley, an analyst at brokerage OANDA.

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Brent crude, the global benchmark, rose 72 cents, or 0.6 percent, to $112.42 at 1225 GMT, but fell from its highest level since March 30 at $113.80 recorded earlier in the session. US West Texas Intermediate rose 14 cents, or 0.1%, to $107.09.

Libyan developments offset concern about demand in China, where the economy slowed in March, sparking first-quarter growth numbers and exacerbating expectations already weakened by COVID-19 restrictions. Read more

“Some Asian investors took profits because they became concerned about slowing demand in China,” said Satoru Yoshida, commodity analyst at Rakuten Securities.

Monday’s data also showed that China refined 2% less oil in March than a year earlier, with productivity falling to the lowest level since October, as a surge in crude prices slashed profit margins and tightened shutdowns on demand. Read more

Oil jumped to its highest level since 2008 in March, with Brent crude rising briefly to $134.

There are fears of deeper supply losses looming. Russian production fell 7.5 percent in the first half of April from March, Interfax news agency reported on Friday, and European Union governments said last week that the bloc’s executive body was preparing proposals to ban Russian crude.

Those comments came before an escalation in the Ukraine war. The Ukrainian authorities said that rockets landed in Lviv in the early hours of Monday morning, and explosions rocked other cities, while Russian forces continued to bombard them after declaring their almost complete control of the port of Mariupol. Read more

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Additional reporting by Yuka Obayashi in Tokyo and Alex Lawler in London; Editing by Jacqueline Wong and Emilia Sithole Mataris

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