WTI and Brent crude oil prices are trading lower by -0.6% at $63.30 and $71.10 per barrel during European session amid reports that OPEC and Russia might re-evaluate their output cut deal on the ongoing supply disruptions from Venezuela and Iran and the new supply threat from the Libyan civil war.

 

OPEC+:

With oil prices rallying almost 40%+ since the start of the year, some reports saying that the OPEC group and Russia are thinking to cancel their output cut deal of the 1.2 million barrels per day, if the supply disruption increases from OPEC countries such as Iran, Libya, Venezuela and oil price keep rallying.

The global oil supply has declined this year mainly from the effects of the US sanctions against Venezuelan and Iranian oil exports where together have lost more than 1 million barrels production per day.

The OPEC+ countries are due to meet in next June to evaluate the supply data until that time and the US administration decision for the Iranian oil export waivers and then to decide if they will cancel the cut deal or extend it until end of 2019 in order to lower the global oil inventories below the 5-year average which was their initial target.

 

Libyan Civil War:

The civil war in Libya has been escalating since the General Haftar launched a surprise attack against the Libyan capital Tripoli at April 03, killing almost 200 people until now. Even though the clashes haven’t affected any oil infrastructure until now, the risk for new crude oil supply disruption after Venezuela’s and Iran’s remains very high, supporting oil prices near the 5-month highs.

The LNA group which General Haftar leads together with its tribe allies, have managed to take under their control most of the significant oil fields and export terminals in the East-South Libya together with the largest oil field of El-Sharara, controlling more than the 50% of the 1.1 million barrels per day Libyan oil production. By capturing Tripoli, LNA and Haftar will take also the control of the revenues from the oil sales and the management of the Central Bank of Libya.

 

Baker Hughes Oil Rigs and US Oil production:

The Baker Hughes reported last Friday an increase by 2 of the active oil rigs in the US area, bringing the total count to 833. Despite the active oil rigs number have stabilized below 1000 since 2015, when they reached the record of 1600, the US oil production has hit new all-time record of 12.2 million barrels per day last week according to EIA amid the improved shale fracking technology applied in the remaining active rigs, increasing the oil output and lowering the operating costs per drilling well.

Sources: Refinitiv

 

Technical Picture:

WTI oil price has failed three times to break above resistance level of $65 since last week, triggering a small profit taking as the energy traders are picking up some profits after the huge rally of 40%+ since start of the year. At the moment, the price found support near $63 while the RSI oscillator is indicating overbought conditions.

 

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Vrasidas Neofytou

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