Crude oil futures were higher in mid-morning trade in Asia June 28, extending gains for a third day as supply disruptions overshadowed fears of a global recession, while OPEC spare capacity was reported to be much lesser than expected.
At 11:08 am Singapore time (0308 GMT), the ICE August Brent futures contract was up $1.55/b (1.35%) from the previous close at $116.64/b, while the NYMEX August light sweet crude contract rose $1.35/b (1.23%) at $110.92/b.
Supply disruptions and a perceived lack of spare capacity has overshadowed fears of a recession this week. Both crude oil benchmarks were on track to gain for a third day, with the ICE Brent crude marker almost at a two-week high.
“WTI closed at the highest level since June as fundamentals overtake recession fears for now, as spot traders veer back to supply tightness with traders flying blind without the EIA inventory data,” said SPI Asset Management Managing Partner Stephen Innes in a June 28 note.
Libya’s state-owned National Oil Corporation is on the verge of declaring force majeure on oil exports from its key eastern oil terminals, according to a June 27 statement from NOC chairman Mustafa Sanalla, amid a political crisis in the country.
This comes as almost half of Libya’s oil production is now offline as tensions between the country’s two rival governments have escalated in recent weeks, with both jostling for power and oil revenues.
This comes shortly after Ecuador’s government June 21 declared force majeure on crude oil and natural gas shipment deliveries as growing indigenous protests block operations in oilfields in the eastern Amazon jungle.
The protests have cost the country over 189,000 barrels in lost crude production since they got underway June 13.
“The risks on the supply side have not gone away, as the latest production outages in Libya have shown,” Commerzbank analyst Carsten Fritsch said in a June 27 note. “They are also likely to mean that OPEC’s oil production in June did not increase any further, despite the expansion of supply that had been agreed.”
Further supply fears came amid reports that French President Emmanuel Macron said he was told by UAE leader Sheikh Mohammed bin Zayed al-Nahyan that the OPEC producer was producing at maximum output and did not have any more spare capacity to tap on, contrary to earlier expectations, according to a Reuters report June 28.
Macron added that he was told that Saudi Arabia had only around 150,000 b/d of spare capacity to tap, the report said, much less than previously assumed.
Dubai crude swaps and intermonth spreads were mostly higher in mid-morning trade in Asia June 28 from the previous close.
The August Dubai swap was pegged at $104.04/b at 10 am Singapore time (0200 GMT), up $3.01/b (2.98%) from the June 27 Asian market close.
The July-August Dubai swap intermonth spread was pegged at $4.09/b at 10 am, up 6 cents/b over the same period, and the August-September intermonth spread was pegged at $3.13/b, unchanged from the previous day.
The August Brent-Dubai EFS was pegged at $12.24/b, down 13 cents/b.
Source: Spglobal.com
