Crude oil is trading in the green to start off the week adding 14 cents to trade at 101.73 after declining late last week from above the 102 price level. Brent oil is also in the positive this morning at 109.99. Speculators continue to watch the turmoil in the Ukraine but the tension and stress seems to be subsiding from the market place. Energy trader’s focus is now turning towards Libya where fighting worsens and the country looks like it could destabilize. Brent extended its first weekly gain this month amid speculation escalating violence in Libya will further disrupt supplies from the holder of Africa’s biggest oil reserves.
Libya accused a retired army general in the eastern city of Benghazi of planning a coup while the nation’s General Assembly was said to be suspended following clashes in Tripoli. Government forces in Ukraine fought insurgents as separatists prepared for an election later this year after declaring independence.
Libya’s crude production “is already impaired and certainly not positive, which should be supportive of higher prices,” Michael McCarthy, a chief strategist at CMC Markets in Sydney, said by phone today. “Adding the potential for escalation in Ukraine, it’s quite clear the risks that oil is on the upside this week.” As reported by Bloomberg.
Libya, a member of the Organization of Petroleum Exporting Countries, has struggled to restore security three years after the revolt that toppled former leader Muammar Qaddafi. Oil production declined to 215,000 barrels a day in April, about 13 percent of capacity, data compiled by Bloomberg show.
Looking across the globe to the US, where driving season is about to kick off gasoline prices climbed this morning to 2.9850. Crude prices moved modestly higher as the market found support from US gasoline demand hopes ahead of the looming summer-holiday driving season and the ongoing Ukraine crisis. Oil prices were finding support from the approaching US summer holiday season that kicks off with the long Memorial Day weekend May 24-26.
“The driving season is right around the corner on Memorial Day and we expect increased demand for gasoline across the summer,” said Andy Lipow of Lipow Oil Associates.
Refineries were beginning to wind down their maintenance season in preparation for a ramp-up in activity in several days, he noted. Total US gasoline inventories fell by 800,000 barrels, or 0.4 percent, last week and were down 0.1 percent from a year ago, according to the Department of Energy.
Also in the US, natural gas edged down last week but is trading in the green this morning at 4.420 as faster-than-expected gains in natural-gas inventories are easing concern that a shortage is looming next winter, spurring speculators to cut bullish bets. Gas futures fell 9.2 percent in the period as stockpile gains topped analysts’ forecasts for a third week. Production from shale deposits in the U.S. Northeast and Midwest climbed to a record 16.1 billion cubic feet a day in the week ended May 9th. The Energy Information Administration said inventories rose 74 billion cubic feet in the week ended May 2. Analysts predicted an increase of 70 billion. Supplies climbed by 105 billion the following week, narrowing the deficit to the five-year average to the least since Feb. 28.