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Trend

Rotterdam: $ 1 lower
Singapore: $ 3 lower
US Gulf: $ 1 lower

Restart of Libyan oil production (Brent: $108.50)

Following the major disturbance in Libyan oil production, output now rebounded from 300kbpd to 700kbpd. According to PM Zeidan, production is expected to reach 800kbpd in the coming days. The production stability has been lacking ever since the 2011 war to overthrow former ruler Gaddafi. We expect large swings in output going forward, until the security situation has improved significantly.

The largest oil field (Buzzard 200kbpd) connected to the Fortis pipeline, which is the underlying price of global crude benchmark Brent, is coming fully back online later today after undergoing maintenance. The operation is (as always) expected to run smoothly, however the chronic technical issues for deepwater operations in the North Sea is just as usual not to be smooth sailing. Any disturbances would have an immediate spillover effect into the 'paper oil market'.

Recommendation

We recommend clients to use any setback in prices to enter hedges, should it suit your budgets. In the current unstable geopolitical environment prices seem to be aiming higher. After the (brief) visit to just below $106 - we estimate $112 to be the next short term price target.