Oil tops $113 a barrel as Libya adds to global supply concerns

Libyan developments offset concern about demand in China

Mon, 18 Apr, 2022 - 18:58

Alex Lawler

Global oil prices rose in choppy trade, with Brent crude topping $113 a barrel, as outages in Libya deepened concern over tight global supply and the Ukraine crisis dragged on, offsetting concern over slowing Chinese demand.

Adding to supply pressures from sanctions on Russia, Libya's National Oil Corp warned "a painful wave of closures" had begun hitting its facilities and declared force majeure at Al-Sharara oilfield and other sites.

"With global supplies now so tight, even the most minor disruption is likely to have an outsized impact on prices," said Jeffrey Halley, analyst at brokerage Oanda.

Brent crude LCOc1, the global benchmark, rose $1.37, or 1.2%, to $113.07, not far from the highest since March 30 of $113.80 hit earlier in the session.

The Libyan developments offset concern about demand in China, where the economy slowed in March, taking the shine off first-quarter growth numbers and worsening an outlook already weakened by Covid-19 curbs.

"Some Asian investors booked profits as they became worried about slowing demand in China," said Satoru Yoshida, a commodity analyst with Rakuten Securities.

Figures also showed China refined 2% less oil in March than a year earlier, with throughput falling to the lowest since October as the surge in crude prices squeezed margins and tight lockdowns hurt demand.

Deeper supply losses

There are concerns of deeper supply losses looming. Russian production declined by 7.5% in the first half of April from March, Interfax reported last week, and EU governments have said the commission was drafting proposals to ban Russian crude.

Those comments came before an escalation in the Ukraine war. Ukrainian authorities said missiles struck Lviv early on Monday and explosions rocked other cities as Russian forces kept up their bombardments after claiming near full control of the port of Mariupol.

Russia’s deputy prime minister Alexander Novak said last week that if more nations banned Russian energy flows, prices may “significantly exceed” historic highs. The US and UK have moved to bar Russian crude, and there’s pressure for the EU to follow.

“The market is still making up its mind about how much Russian oil may be kicked out of the market,” said Matt Stanley, a trader and broker with Star Fuels in Dubai. “That’s keeping Brent at about $110 a barrel.”