Libyan Output Collapse Supports Crude Prices, But Coronavirus Worries Still Prevail

Meanwhile, expectations are that OPEC will enact deeper output cuts: File Image/PixaBay

Following a tumultuous crude trading day on Monday, traders on Tuesday turned to Libya's collapsed oil output to assuage their ongoing fears about China's coronavirus impacting demand - and as a result, crude prices were near flat.

Brent rose 8 cents to settle at $57.75 per barrel, and West Texas Intermediate was unchanged from the previous session, settling at $52.05 per barrel.

Reportedly, Libya's oil production stood at 123,537 bpd as of February 18, with losses resulting from that country's oil blockade exceeding $1.7-billion.

Also easing losses was news that the U.S. imposed a three-month sanction on a unit of Russia's Rosneft for maintaining ties with Venezuela president Nicolas Maduro and its state-run oil company.

Phil Flynn, senior market analyst at Price Futures Group Inc., said, "These sanctions will be supportive for prices; ultimately, Russia does not want to be on the wrong side of the energy trade."

If Libya provided a modicum of support on Tuesday,  traders were apparently not mollified that the Organization of the Petroleum Exporting Countries (OPEC) will meet in Vienna on March 6 to consider cutting supply by a further 600,000 barrels per day (bpd) in order to offset weakening demand caused by the virus.

Carsten Fritsch, commodity analyst for Commerzbank, noted that "Risk aversion has returned to the markets [because] OPEC+ has shown no sign yet of reacting to the virus-related slump in demand by making additional production cuts."

For the record, the International Energy Agency believes that first-quarter oil demand is likely to fall by 435,000 bpd from a year ago.