Promises, promises…

Oil prices sold off yesterday as the Libyan government says they will re-open closed oil ports after fighting stopped Libyan crude exports for the last two weeks. Yet one cannot count on the promise of Libyan oil as they have yet to prove they can be a reliable supplier. Yet oil is on the rise again as a weakening dollar and the promise that OPEC might extend production cuts and the fact that refiners will soon rise again out of maintenance, is giving the bulls some new life.

The energy market was searching for direction when a Bloomberg story that Libya’s major oil ports of Es Sider and Ras Lanuf were resuming operations and preparing to export crude after a two-week halt in shipments due to military clashes that caused oil to sell off in the spring holiday trade. Yet the reliability of predictions of Libyan crude exports returning over the last few years in a timely fashion has been one of misplaced optimism. While the market did not seem to pay a lot of attention to the Libyan disruption, if it continues along with an extension of OPEC production cuts it will speed up the rebalancing of the global oil market. Libyan oil output did hit 700,000 barrels a day in February from 260,000 a day in August but still short of the 1.6 million barrels of oil that it was pumping before Muammar Gaddafi fell. OPEC was sending signals that their temporary production cut may be extended. The cut that the naysayers said wound not happen, then after it did happen, said it would not be complied with is now looking like it is going to be extended.

Reuters reported that OPEC is leaning towards a deal extension during the OPEC meeting in May quoting a delegate as saying, “An extension is needed to balance the market. Any extension of the cut agreement should be with non-OPEC.” This comes as Saudi Arabia cuts are starting to show up and should signal big drops in U.S. oil imports in the coming weeks. Bloomberg reported that oil shipments from Saudi Arabia fell 3.8 percent to 7.7 million barrels a day, according to data published Monday on the Joint Organizations Data Initiative website. Its crude output declined to 9.75 million barrels a day, the lowest since February 2015, the data showed.