Oil Climbs as Libyan Output Falls Ahead of OPEC+ Supply Meeting

Futures in New York traded near $76 a barrel in European trading after a 2.3% decline on Friday. Libya’s crude output is expected to fall to the lowest in more than a year as workers try and fix a damaged pipeline. It comes less than two weeks after militia shuttered Sharara, the country’s biggest oil field.

The Organization of Petroleum Exporting Countries reduced its estimate of the surplus in global oil markets this quarter, a day before the group and its allies considers another output boost. The findings may encourage the 23-nation OPEC+ coalition to proceed with the modest production increase that’s expected, according to a Bloomberg survey.

Last year, oil posted its biggest annual gain since 2009 as the rollout of Covid-19 vaccines helped economies reopen, boosting energy demand. While OPEC+ is poised to add another 400,000 barrels a day to global supply, there are still concerns about longer-term consumption as China tackles a virus flare-up and the omicron variant leads to flight cancellations worldwide.

“Speculators spent the last couple of months cutting bullish oil bets to the lowest in more than a year and some of these are now playing catchup with the market finding a firmer footing,” said Ole Sloth Hansen, head of commodities research at Saxo Bank A/S in Copenhagen. The market is being “driven by Libyan supply disruption, signs that Russia’s production growth is slowing and reduced worries about omicron’s impact on global mobility,” he said.

See also: Key Oil Spread Signals Omicron Concerns Are Likely Easing: Chart

Libya expects its oil production to drop by another 200,000 barrels a day over the next week. Combined with supply lost from the shutdown of its Sharara field, that will trim the nation’s overall output to about 700,000 barrels a day.

“I think OPEC+’s decision is a foregone conclusion and omicron news and data will remain the major influence on oil sentiment,” said Vandana Hari, founder of consultant Vanda Insights in Singapore. “We’re likely seeing some bargain-hunting today after a rush to sell at the end of last week.”