Oil traded above $60 a barrel amid concern about Libyan supply after government forces struck Islamist militias close to the nation’s largest terminal at Es Sider.
Brent moved between gains and losses in London. Libya’s government said its action was prompted by a militia attack on Es Sider where loadings were halted earlier this month. Libya’s output has declined to 352,000 barrels a day, according to Mohamed Elharari, a spokesman at state-run National Oil Corp. That compares with production of close to 1.6 million barrels a day in 2011. Trading volumes are about 89 percent below the 100- day average for the time of day with much of Europe on holiday after Christmas.
Futures slumped 45 percent this year, poised for the biggest drop since 2008, as the Organization of Petroleum Exporting Countries resisted supply cuts to defend market share while the highest U.S. production in three decades exacerbated a global glut. Saudi Arabia, OPEC’s biggest producer, is assuming an oil price of $80 a barrel for 2015, said John Sfakianakis, a former economic adviser to the country’s government.
“The situation is getting worse in Libya, and we can pretty much write off supplies from there,” Olivier Jakob, managing director at Petromatrix GmbH in Zug, Switzerland, said by phone. “Even without an OPEC supply cut, we are getting one from Libya.”
Brent for February settlement added as much as 0.8 percent, or 46 cents, to $60.70 a barrel on the London-based ICE Futures Europe exchange, and was at $60.41 as of 10:48 a.m. London time. The European benchmark crude traded at a premium of $4.21 to West Texas Intermediate.
WTI for February delivery rose 43 cents to $56.27 in electronic trading on the New York Mercantile Exchange. The volume of all futures traded was about 49 percent below the 100- day average for the time of day.
Libya’s state-run National Oil Corp. declared force majeure in Es Sider and at Ras Lanuf, the country’s third-largest facility, earlier this month. The nation’s output has dropped from 850,000 barrels a day in October, according to Bloomberg estimates.
Saudi Arabia, OPEC’s largest producer, is probably assuming an oil price of $80 a barrel for its 2015 budget, down from this year’s $103, Sfakianakis, who used to be chief economic adviser to the Ministry of Finance, said by phone.
Iraq this week approved a budget based on oil at $60 a barrel. The government in Baghdad accepted the “Saudi theory” that OPEC should protect its market share and let prices drop to reduce output elsewhere, Oil Minister Adel Abdul Mahdi said in an interview this week.
OPEC, whose 12 members supply about 40 percent of the world’s oil, decided at a Nov. 27 meeting to maintain its production target at 30 million barrels a day. The group pumped 30.56 million barrels a day in November, exceeding its target for a sixth straight month, a Bloomberg survey of companies, producers and analysts shows.
Implied volatility for at-the-money options in the front- month Brent contract, a measure of expected futures movements and an indicator of options value, climbed to 49.9 percent this week, data compiled by Bloomberg show. It’s at about 47 today. WTI’s volatility is also near the highest since October 2011.
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