London — Oil prices fell more than 1% on Tuesday on expectations that a well-supplied market would be able to absorb disruptions that have cut Libya’s crude production to a trickle.
Brent crude LCOc1 was down 92 cents at $64.28 a barrel by 1016 GMT, having risen to its highest in more than a week on Monday. U.S. West Texas Intermediate crude CLc1 was down 59 cents at $57.95.
“Market participants appear to fret less about supply disruptions in the Middle East, or at least the risk of disruptions, thanks to the impressive growth we have seen in U.S. output over recent years,” Bank ING said.
Almost all of Libya’s crude export capacity is now under force majeure – a waiver on contractual obligations – after pipeline blockades in the east and west of the country hindered oil production.
If Libyan exports are halted for any sustained period, storage tanks will fill within days and production will slow to 72,000 barrels per day (bpd), said a spokesman for state oil company NOC. Libya has been producing about 1.2 million bpd rec
Anti-government unrest in Iraq, another major oil producer, also supported oil prices initially, but officials later said output from southern oilfields has been unaffected by the unrest.
Any supply disruptions could be offset by increased output from the Organization of the Petroleum Exporting Countries (OPEC), which could limit the impact on global oil markets, the head of Japan’s petroleum industry body said.
ING said that spare OPEC capacity, which stands in excess of 3 million bpd, was reassuring the market.
The International Monetary Fund (IMF) on Monday trimmed back its 2020 global economic growth forecasts by a tenth of a percentage point to 3.3% because of sharper than expected slowdowns in India and other emerging markets. But the IMF said that a U.S.-China trade deal was another sign that trade and manufacturing activity could soon bottom out.
Barclays on Tuesday forecast 2020 oil demand to rise by 1.4 million bpd, 50,000 bpd higher than its previous forecast and up from growth of 900,000 bpd in 2019.
The bank maintained its 2020 forecasts for Brent and West Texas Intermediate (WTI) prices at $62 and $57 a barrel respectively.
*Jessica Jaganathan; Editing: David Goodman – Reuters