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Demand Fears, Return of Supply in Libya, Kazakhstan Pull Down Oil Prices

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By Adedapo Adesanya

Oil prices fell on Monday as concerns about demand were stoked by the rapid global rise in Omicron coronavirus infections and rise in crude supply from Libya and Kazakhstan.

Brent crude lost 83 cents or 1.02 per cent to trade at $80.92 per barrel while the United States West Texas Intermediate (WTI) crude fell by 49 cents or 0.62 per cent to sell at $78.41 per barrel.

Demand worries sparked afresh as a new round of fears in the face of the nearly 2 million new coronavirus cases discovered in the last 24 hours, defying high vaccination rates.

This concern pushed off gains recorded last week following protests in Kazakhstan that hit production at the country’s Tengiz oilfield while pipeline maintenance in Libya lowered production to 729,000 barrels per day from a high of 1.3 million barrels per day last year.

The world’s largest oil exporter, China recorded its first local transmission of the Omicron variant over the weekend in the city of Tianjin.

According to analysts, the high rate of transmissibility, combined with China’s address of the coronavirus with lockdowns, could bring the country’s first-quarter growth down by 0.6 to 0.7 percentage points to a bit over 4 per cent year-on-year.

Also, Kazakhstan’s largest oil venture Tengizchevroil (TCO) is gradually increasing production to reach normal rates after protests limited output and this impacted prices yesterday.

In addition, production in Libya ticked up on Monday as it rose to 900,000 barrels per day from 729,000 barrels per day after the completion of repair work on a pipeline, the country’s oil ministry said amid continuous blockade.

The pipeline that was repaired links two oil fields to the Es Sider export terminal. Its shutdown for repairs took 200,000 barrels per day offline, which coincided with field outages caused by blockades that shaved off more barrels from Libya’s total.

Last week, oil prices found support from rising global demand and lower-than-expected supply additions from the Organisation of Petroleum Exporting Countries (OPEC) and allies including Russia, a group collectively known as OPEC+.

OPEC’s output in December rose by 70,000 barrels per day from the previous month, versus the 253,000 barrels per day increase allowed under the OPEC+ supply deal. That deal restored output cut in 2020 when demand collapsed during COVID-19 lockdowns.

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