An Iraqi workman gauges gas emissions from an oil pipe at the Daura oil refiner
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Oil prices rose to their highest in profuse than week on Monday after two large crude production bases in Libya began shutting down amongst a military blockade, setting the stage for crude flows from the OPEC member to be cut to a trickle.
Brent crude approaches were up by 74 cents, or 1.1%, to $65.59 by 0331 GMT, having earlier reached $66.00 a barrel, the highest since Jan. 9. The West Texas Halfway contract was up by 58 cents, or 1%, at $59.12 a barrel, after rising to $59.73, the highest since Jan. 10.
In the latest event in a long-running conflict in Libya, where two rival factions have claimed the right to rule the country for more than five years, the Nationalist Oil Corporation (NOC) on Sunday said two big oilfields in the southwest had begun shutting down after forces loyal to the Libyan Nationwide Army closed a pipeline.
“If this sort of disruption endures, it’s meaningful … the market is right to be reacting with a bullish shape,” said Lachlan Shaw, head of commodity research, at National Australia Bank in Melbourne.
“It just continues to emphasise, even though that the world market is clearly in surplus and there are plenty of stocks, the fact is the market still depends on a add up of key regions that have heightened geopolitical risk.”
Oil prices had fallen back in the last two weeks. After the outbreak of hostilities between the Collective States and Iran at the beginning of the year triggered a jump, both sides took steps to pull back from spat, calming the market’s mood.
If exports are halted for any sustained period, tanks for storage will fill within days and output will slow to 72,000 barrels per day (bpd), an NOC spokesman said. Libya has been producing around 1.2 million bpd recently.
Also on Sunday, odd countries agreed at a summit in Berlin on Sunday to shore up a shaky truce in Libya, even as the talks were outshone by the latest blockade.
German Chancellor Angela Merkel told reporters that the Berlin summit, attended by the most important backers of the rival Libyan factions, had agreed that a tentative truce in Tripoli over the past week should be kick over run away into a permanent ceasefire to allow a political process to take place.