Political Threats To Supply Driving Oil Prices Higher

Oil prices rose sharply on Monday in reaction to Libya’s eastern government closing its oil fields and halting exports to protest the government in Tripoli’s control of the central bank, which manages the country’s oil revenues. The move added to existing fears that an escalation in tensions between Israel and Iran could threaten the region’s oil production. The market wasn’t worried by the 0.3% rise in the USD index.

• WTI rose 3.1% to $77.16/bbl and has started today slightly lower at $77.13. It rose to $77.60, above initial resistance at $76.26, 50-day EMA, but still below key resistance at $78.54. The benchmark is now up 7.3% since Wednesday and slightly higher on the month. The rally for now is seen as corrective and the bearish theme remains intact.
• Brent is up 3.1% to $81.43 after a high of $81.58, above the 50-day EMA opening up key resistance at $82.40. Key support is at $75.05 and a break below this would confirm the resumption of the bear leg.
• Libya produced 1.18mbd in July and the current dispute has reduced this to 1mbd and there is now a risk that the dispute brings it to zero, significantly tightening the global market. The east shutdown the 300kbd Sharara oil field earlier in August but production has risen to 85kbd to supply refining, according to Reuters.
• Focus has now shifted to the supply side with developments in Libya, tensions between Iran and Israel, a tanker adrift in the Red Sea after Houthi strikes and low US inventories. Industry data is out later today with official EIA numbers on Wednesday. A Reuters’ poll is forecasting another drop in US EIA stocks.