On Thursday, oil prices closed lower as Libya restarted production in certain fields. Gasoline stockpiles rose past expectations. U.S. crude stockpiles dropped in the previous week, keeping prices at bay. WTI crude oil closed lower by 1.3% to $48.98 a barrel, while Brent crude oil closed lower to $51.63 a barrel.

Production Restart

The biggest reason for oil prices falling was because of Libya Libya Libya Libya Libya Libya Libya Libya. The two oil fields in question are the Sharara and El Feel. Both of these fields are estimated to produce a combined 400,000 barrels a day. It doesn’t end there though.

That is because Libya is expecting to increase production to a higher level. Libya stated that it wants to eventually increase production to between 800,000 to 1.1 million barrels per day.

The reason why oil prices fell is because an increase in stockpiles is a huge negative for the oil market. With the oil fields being restarted, this means that all this added supply will be brought back into the global market. Considering that there is a global oil glut, it doesn’t bode well for prices.

Gasoline Stockpiles Increase

The problem is that gasoline stockpiles increased in the current released report. That is not good, because it spells trouble for oil prices. The Energy Information Administration — EIA — revealed that gasoline stockpiles rose by 3 million barrels per day. There are two problems with respect to this data.

For starters, there was an expectation that gasoline stockpiles would drop by 1 million barrels per day. The fact that the analysts’ estimate was not met is very disturbing. Secondly, stockpiles increasing instead of dropping was a huge negative.

How does an increase in gasoline stockpiles affect oil prices? That is because crude oil uses gasoline as a component. Therefore, refiners don’t want to buy any more gasoline as a result. That in turns causes crude stockpiles to build as well. With stockpiles building up on both ends, oil prices start to trade lower.