Energy Prospectus

WTI opened this morning at more than $75/bbl, primarily because a significant "Unplanned Supply" outage has officially started.

Libya Stops Pumping Oil from OilPrice.com

Libya’s National Oil Corporation has declared force majeure on crude oil loadings from two oil terminals, which effectively removed 850,000 bpd from the country’s production, Libyan media report.

“Despite our warning of the consequences and attempts to reason with the LNA General Command, two legitimate allocations were blocked from loading at Hariga and Zueitina this weekend. The storage tanks are full and production will now go offline,” NOC’s chairman Mustafa Sanalla said.

Hariga and Zueitina, like the rest of the terminals in the Oil Crescent, are controlled by the Libyan National Army, which handed control over them to the Benghazi-based NOC. Both are affiliated with the eastern government, which is not recognized by the UN.

On Saturday, the Benghazi-based NOC refused two loadings, one at Zuetina and one at Hariga, claiming the tankers waiting to load had not asked for its approval, which was now mandatory.

The LNA has controlled the Oil Crescent ports since 2016, but last month its grip on them was challenged by other groups led by a Petroleum Facilities Guard commander who is wanted by the Tripoli authorities for the two-year blockade of the ports. Yet unlike in 2016, when it handed the ports to the Tripoli-based NOC, the LNA now passed control of the facilities to the Benghazi NOC, signaling that the divide in Libya between East and West is deepening instead of closing.
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Libya is a mess and it now looks like an all out civil war is possible. - Dan

"The storage tanks are full and production will now go offline."

Read: https://www.aljazeera.com/news/2018/07/ ... 37923.html

Investing.com - Oil prices gained more than 1% on Tuesday with West Texas Intermediate crude passing the $75 mark for the first time since 2014 as supply outages and expectations for further declines in U.S. stockpiles continued to offset an output increase from major producers.

New York-traded West Texas Intermediate crude futures jumped $1.12, or about 1.5%, to $75.06 a barrel by 9:33AM ET (13:33GMT), just off an intraday high of $75.14, its highest level since November 2014.

Meanwhile, Brent crude futures, the benchmark for oil prices outside the U.S., traded up $1.04, or 1.4%, to $78.34, also at levels not seen in three-and-a-half years.

Unplanned supply stoppages from Libya, Venezuela and Angola, along with an outage at Canada's Syncrude upgrader that has especially strained North American markets, coupled with U.S. sanctions against OPEC-exporter Iran, are leading traders to bet that an OPEC agreement to increase in output will be unable to fill in the void.

OPEC and its allies, including Russia, agreed to boost supplies, easing curbs in place since the start of 2017.

After OPEC reached 152% compliance with the production curbe in May, the cartel agreed to drop that compliance to 100%.

Saudi Arabia, the de facto leader of OPEC, said on Saturday the move would translate into a nominal output rise of around 1 million barrels per day (bpd).

But Libya’s National Oil Corp declared force majeure on loadings from Zueitina and Hariga ports on Monday, resulting in 850,000 bpd of supplies being disrupted.

Meanwhile, output at Syncrude Canada oil sands facility was hit by a power outage last month that cut off the production of 360,000 bpd. The facility is expected to be offline through July, draining U.S. inventories.

The American Petroleum Institute will be releasing its weekly stockpiles later on Tuesday with the government data due out on Thursday, one day later than normal due to the 4th of July holiday.

Consensus expects a draw of 3.267 million barrels of crude oil, in what would be the fourth straight weekly decline in inventories.

The markets, especially the oil market, can do crazy things the day before a major holiday and the 4th of July is about as "major" as it gets. Lots of transportation fuel will be burned up during this long holiday week.

At 8:50 AM today the front month NYMEX futures contract (August) for WTI touched $75.25/bbl, the highest price since early 2014. At that point the hedge funds that hold lots of long positions hit the "Sell Button" and the contract dropped steadily to $72.88/bbl. At the low point, buyers stepped in (probably the same ones that sold at $75) and WTI is now back over $74.

Here is what happens.
> As the price of oil moves higher, the hedge funds set tighter and tighter stop loss orders to lock in their juicy gains. They enjoy vacations more if they can book a big gain before heading out.
> When the magic number (today it was $75.25) is hit, the selling starts and it just cascades through all of the sell orders.
> At some point ($73 today), oil looks cheap again and the buyers come back

Crude oil is the most actively traded commodity in the world. Each day twice as much oil trades as all the gold, silver and other metals combined. WTI is the most actively traded oil index. Each NYMEX futures contract equals 1,000 barrels of oil.