Brent oil has sunk to back to its lows:
The culprit last night was Libya:
Libya’s oil production has risen above 760,000 barrels per day (bpd), its highest since December 2014, the National Oil Corporation (NOC) said on Monday.
Chairman Mustafa Sanalla said in a statement the NOC was working on plans to increase production further. He has previously set a goal of boosting output to 1.1 million bpd by August.
The NOC gave no breakdown for the latest production increase, but it is mainly due to the reopening of the major western field of Sharara last week.
There’s a virtuous cycle developing here. The more money Libya makes the more it can stabilise itself. It’ll come in fits and starts but I reckon they reach that target this year.
To date, that would mean that since the OPEC deal was struck they have doubled production by roughly 400mb/d. The US has added 500mb/d over the same period:
But both Libya and the US will add another 0.8mb/d across H2. Given OPEC cut 1.2mb/d and non-OPEC by 0.6mb/d (but have only delivered 4mb/d) , Libya and the US will wipe out the cut before year end.
That leaves demand growth to help rebalance the market and it’s running about 1.5mb/d. By my reckoning we had a 2mb/d surplus when OPEC cut so we’re still long way from an oil deficit over the year. Demand is cyclical and is strong now but the later part of the year it weakens again:
2018 could bring a more balanced market but only if prices do not rise further and trigger even more shale.
The bull case for oil is dead. Global inflation be damned.
