Crude Oil Benchmark Brent Sees Biggest One-Day Fall In Two Years

Irving Hamilton
July 12, 2018

-China trade tensions threatened to hurt oil demand, and news that Libya would reopen its ports raised expectations of growing supply.

Oil prices were falling Wednesday following the announcement by the Trump administration of new tariffs on Chinese goods. That dropped overall crude inventories, not including the US strategic reserve, to 405.2 million barrels.

Reports show that production fell to 527,000 barrels per day (bpd) from a high of 1.28 million bpd in February following the port closures.

Finally, we have to continue to expect production from Saudi Arabia, Russia and the U.S.to rise.

The Saudi production boost would have raised OPEC's total production much higher had it not been for the plunge in production in Libya, whose oil ports were closed last month after the battle over oil terminals renewed, another slump in Venezuela's output, and additional decline in Angola's production.

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"Libyan relief changes the conversation about spare capacity", said John Kilduff, a partner at Again Capital Management.

"Both oil contracts have recently stalled around key long-term and psychologically-important levels at $80 and $75 respectively, as market participants weigh the risks of a potential correction in prices", Fawad Razaqzada, an analyst at FOREX.com, said in a note.

A pump jack lifts oil out of a well, during a sandstorm in Midland, Texas, U.S., April 13, 2018. However, Iran exports might squeeze further if USA takes more aggressive stance on sanctions, they said.

"In 2019, EIA forecasts that the United States will average almost 12 million barrels of crude oil production per day", said Linda Capuano, Administrator of the EIA.

"In spite of the extraordinary draw in crude oil inventories, the market is under pressure after refiners produced a record amount of gasoline this week and in conjunction with a greater than expected build in distillate inventories", said Andrew Lipow, president at Lipow Oil Associates in Houston.

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