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Crude Oil Extends Gains on Iraq, Libya Output Disruption

January 20, 2020 at 18:01 by Andrew Moran

Crude oil futures are extending their gains to kick off the trading week, driven by disruption to production in Iraq and Libya amid unrest. But the modest rally was capped on reports that other producers would offset the output stoppage. Crude prices are looking to reverse their disappointing performance so far in 2020, which might happen as oil-rich nations limit their output volumes.

February West Texas Intermediate (WTI) crude oil futures jumped $0.26, or 0.44%, to $58.80 per barrel at 16:45 GMT on Monday on the New York Mercantile Exchange. Crude prices settled higher on Friday, but they did record a weekly loss of just under 1%. In the first three weeks of the year, oil is down 4%.

Brent, the international benchmark for oil prices, also recorded modest gains to start the trading week. March Brent crude futures picked up $0.54, or 0.83%, to $65.39 a barrel on London’s ICE Futures exchange.

On Sunday, Libya’s largest oil field halted production after armed forces destroyed a pipeline and blocked exports. This has resulted in between 800,000 barrels per day (bpd) and 1.2 million bpd being taken out, but some experts warn that it might be higher. The National Oil Corporation (NOC) warned that nearly all of the country’s output could be taken offline as loyalists to Khalifa Haftar maintain blockades of major eastern oil ports.

How bad could it be? It is estimated that production could slow to 72,000 bpd. However, the European Union (EU) has promised to examine all possible scenarios to sustain a formal ceasefire in Libya. Foreign powers have been unable to fully uphold a peace pact since the fall of Moammar Gaddafi close to a decade ago.

In Iraq, security guards at an oil field went on strike, causing the forced stoppage of production. The facility could not maintain operations due to the unrest that is ubiquitous across the war-torn state.

In industry news, the Baker Hughes total oil rig count declined from 670 to 659 and the number of gas rigs slipped from 123 to 119. Also, the US Energy Information Administration (EIA) reported a domestic supply increase of 1.2 million barrels to 431.1 million barrels.

In other energy markets, March natural gas futures plunged $0.065, or 3.3%, to $1.935 per million British thermal units (btu). February gasoline futures was flat at $1.64 a gallon. February heating oil futures tacked on $0.0175, or 0.93%, to $1.88 per gallon.

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