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

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These translations are done via Google Translate
(Bloomberg) —
Oil rose as Libyan supply tightened ahead of an OPEC+ meeting on Tuesday to discuss production policy for February.

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.

Oil opens the year higher ahead of OPEC+ meeting

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.

  • West Texas Intermediate for February delivery rose 0.6% to $75.63 a barrel on the New York Mercantile Exchange at 12:27 p.m. in London.
  • Brent for March settlement gained 0.7% to $78.34 a barrel on the ICE Futures Europe exchange.
  • Brent’s prompt timespread was 45 cents in backwardation, compared with 30 cents at the start of last month.

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.”

Other oil-market news:
  • Indian diesel sales inched closer to pre-pandemic levels in December as it was business-as-usual despite the threat of omicron, according to preliminary data from refinery officials with direct knowledge of the matter.
  • Russia failed to boost oil output last month despite a generous ramp-up quota in its OPEC+ agreement, indicating the country has deployed all of its current available production capacity.
  • Oman will seek to produce 1.05 million barrels a day in 2022, according to a finance ministry statement reported by the Times of Oman.

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