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Oil Futures Jump on Libyan Supply Disruption, OPEC Talks

March 28, 2017 at 17:05 by Andrew Moran

Oil prices are surging on Tuesday on supply concerns in the Middle East. Libya’s crude supply was disrupted by a militia on Monday and there are talks among Organization of Petroleum Exporting Countries (OPEC) members to potentially implement a six-month extension to production cuts. These are all helping oil futures climb at a time when crude needs a boost.

May West Texas Intermediate (WTI) crude futures rose $0.90, or 1.89%, to $48.63 per barrel at 16:38 GMT on Tuesday on the New York Mercantile Exchange. This comes one day after US crude posted a loss.

Brent, the international benchmark for oil prices, is joining the rally. May Brent crude futures jumped $0.91, or 1.79%, to $51.66 a barrel on London’s ICE Futures Exchange. Brent also suffered a loss on Monday.

Supply woes in the Middle East are supporting oil prices. In Libya, an armed group shut down pipelines over disputes regarding wage issues, which disrupted production of 250,000 barrels per day (bpd). The event came as the Libyan government planned to increase output to 800,000 bpd next month, from the current 700,000 bpd.

This past weekend, several OPEC nations, Russia, and Oman held an informal meeting in Kuwait to discuss the current state of compliance. Representatives from the countries did not agree to extending the production freeze, but they did say that they would request a review of the arrangement next month and recommend an extension. Non-OPEC member Azerbaijan is already open to renewing the agreement this summer.

Investors are still fearful that US shale oil producers would accelerate output levels to take advantage of higher prices. Even with the OPEC cuts in place, US crude has been contributing to the global supply glut, and it is still seen as a threat to the international agreement to limit crude oil production.

The global energy market will receive its weekly update on US crude supplies as the Energy Information Administration (EIA) will release its report on Wednesday. A recent poll by S&P Global Platts projects an increase of 300,000 barrels in crude supplies.

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