Libyan port deal puts pressure on crude prices
Tensions in Libya and the Middle East along with Russia and Ukraine boosted prices at the start of the month
Crude prices fell in mid-April as a possible restart of Libyan crude supply to markets helped to balance gains from tensions between Russia and Ukraine. Brent and WTI prices were trading around $109.70 per barrel (/b) and $103/b respectively on 22 April.
Supply outages in Libya and northern Iraq, as well as market anxiety over tensions between Russia and Ukraine, boosted prices at the beginning of April, countering seasonally weaker demand and reduced refinery throughputs.
Brent prices increased to a near six-week high in mid-April, to around $110/b, after the US and EU agreed to expand economic sanctions against Russia over Ukraine. However, these gains were tempered when, on 6 April, Libyan rebels reached a deal with the government to reopen four oil terminals which have been blockaded since July.
As part of the deal, the Zueitina and Hariga facilities were to reopen immediately and the Ras Lanuf and Es Sider terminals were to resume oil exports within a month. However, on 20 April, the government said the resumption of operations at Zueitina, in the country’s east, had been delayed.
Bearish economic data from China, indicating its crude consumption may slow, also put pressure on prices. The International Monetary Fund lowered its growth forecast for this year to 7.5%, down from 7.7% last year.
The International Energy Agency (IEA), though, has retained its forecast of a 3.4% growth in Chinese oil demand this year. The IEA expects Chinese oil demand to reach 10.4 million barrels per day (b/d) in 2014. The agency also reiterated its global oil demand forecast for 2014 at 92.7m b/d as a 70,000 b/d increase in non-OECD Asian demand offset falls in Russian oil demand.
The IEA has cut its 2014 forecast for Russian oil demand by 55,000 b/d, to 3.5m b/d, “in the wake of Russia’s annexation of Crimea”, it said. The World Bank also cut its forecast for Russian economic growth to 1.1%, down from 2.2% prior to the annexation.