Libya Action Pauses Oil Rally After Weekly Gain of 10%

Commodities & Futures
© Reuters.  © Reuters.

By Barani Krishnan – “Make my day,” Saudi Energy Minister Abdulaziz bin Salman told oil bears Thursday, daring them to bet against higher crude prices. Renegade Libyan general Khalifa Haftar may have just given oil’s short sellers a reason, striking a deal with the government in Tripoli on Friday that could bring another million barrels to the market.

Haftar said he will lift a blockade on Libyan crude production after an agreement with the country’s deputy premier, Bloomberg reported, adding that there was no clarity on when exports will restart and whether the government-run National Oil Co. would be included in the deal. Libya was pumping as much 1.1 million barrels a day before a blockade imposed by forces loyal to Haftar.

News of the peace deal was enough to bring crude prices off their highs for the day and to a mixed close.

New York-traded , the key indicator for U.S. crude price, settled up 14 cents at $ 41.11 per barrel, after a session high of $ 41.49. For the week, WTI rose $ 3.78, or 10.1%.

London-traded crude, the global benchmark for oil, closed the New York trading session down 15 cents at $ 43.15 per barrel. For the week, Brent gained $ 3.32, or 8.3%.

The oil rally was heightened by this week’s OPEC+ meeting, where Abdulaziz threatened to make life “hell” for oil bears who bet against the cartel.

“I will make this market jumpy. I’m going to make sure whoever gambles on this market will be ouching like hell,” the Saudi Energy Minister said, before adding the “Make my day” quip made famous by Hollywood star Clint Eastwood in the Dirty Harry detective movies of the 1970s and 80s.

Crude prices fell a combined 13% in two previous weeks as the end of the summer driving season in the United States cast doubts about gasoline demand.

Prices were also weakened by signs that OPEC members such as Iraq, Nigeria and the UAE — as well as the cartel’s key ally Russia — were producing beyond levels pledged under their pact.

In its monthly report published Monday, OPEC revised down its outlook for global oil demand to an average of 90.2 million barrels per day in 2020. That’s down 400,000 bpd from the previous month’s estimate and reflects a contraction of 9.5 million bpd year-on-year.

But in Thursday’s live streamed virtual meeting, Abdulaziz along with Alexander Novak and Suhail Mohamed Mazrouei, his counterparts from Russia and UAE, respectively, sought to assure that all the “cheaters” within OPEC will make up for production quotas they had flouted. 

The alliance also committed to continue the April agreement into December, despite some like the Saudis deciding to raise output.

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