22 December 2016, London/Singapore — Oil prices slipped in tepid trading on Thursday, pressured by an unexpected rise in U.S. crude inventories last week and moves by Libya to boost output over the next few months.
The decline was curbed by a weaker dollar and optimism that crude producers would abide by an agreement to limit output to prop up prices.
Brent futures LCOc1 for February delivery fell by 20 cents to $54.26 a barrel by 1200 GMT, having finished 89 cents lower on Wednesday. U.S. West Texas Intermediate crude CLc1 dropped 19 cents to $52.30 a barrel.
The dollar index .DXY, which tracks the greenback against a basket of six currencies, slipped by 0.09 percent as investors took profits after its rise to a 14-year peak earlier this week.
A weaker dollar makes greenback-denominated commodities including oil cheaper for holders of other currencies.
U.S. crude stocks posted a surprise build last week, climbing by 2.3 million barrels compared with an expected decline of 2.5 million barrels, the U.S. Energy Information Administration said on Wednesday.
Libya’s National Oil Corporation (NOC) said it hoped to add 270,000 barrels per day (bpd) to national production after it confirmed on Tuesday that pipelines leading from the Sharara and El Feel fields had reopened. NOC said that Sharara output reached 58,000 bpd on Wednesday.
“Short-haul crude oil supplies to Europe are increasing with the restart of Libya and that will provide a cap for European crude oil strength,” Olivier Jakob, managing director of PetroMatrix consultancy, said.
Libya recently doubled output to 600,000 bpd, and Jonathan Barratt, chief investment officer at Sydney’s Ayers Alliance, said the country had the capacity to ramp up production further, to as much as 1.2 million b/d.
But optimism that oil producers would stick to an agreement made earlier this month to cut output by almost 1.8 million b/d from Jan. 1 reined in the drop in prices.
“It is a safe assumption particularly in the early stages that OPEC and non-OPEC producers will abide by the agreement to curb output,” said Ric Spooner, chief market analyst at CMC Markets in Sydney.
“If you look at where the biggest production cuts are coming from, it’s largely about the Gulf states and Russia – this gives me, even more comfort there will be material compliance,” he said.
*Dmitry Zhdannikov & Keith Wallis; Editing: Christian Schmollinger & Susan Thomas – Reuters