Key points
- Brent surged back above USD 80 on Monday, as the focus shifted back to supply concerns
- Libya’s Eastern government said it would stop all oil production and exports
- The bulk of the oil-rich nations +1.1 million barrels per day output is produced and controlled by the Eastern govt.
- A current weak demand outlook could see the mid-80’s in Brent provide a ceiling for now
Brent crude oil trades back above USD 80 per barrel, having once again managed to bounce ahead of key support in the USD 75 area. Recent weakness was driven by demand fears, especially in China, the world’s top importer of crude, leading to lower refinery runs and diminished oil demand. Refinery margins, the key driver for crude demand, remain weak as well in Europe and the USA, leading to lower prices, potentially worsened by the prospect for rising non-OPEC and, not least, OPEC+ supply as the group begins to unwind voluntary cuts.
However, since the weekend when Israel and Hezbollah exchanged fire, the price has found fresh support, which was strengthened further on Monday when the risk of an actual disruption, not just the fear of one, helped boost prices. This after Libya’s Eastern government said it would stop all oil production and exports, as the struggle with its Tripoli-based rival for control of the central bank and the nation’s oil wealth heats up. This potentially threatens another conflict which, during the past decade, has seen production from this oil-rich nation gyrate between near-zero barrels to around 1.2 million barrels per day.