Further to my note yesterday, there seems to a lot of focus recently on one particular commodity: oil.
Producers within the energy world and beyond have been desperately seeking crude exposure. Largely because this one of the few commodities whose price has held up globally.
The last few months have strengthened oil’s unstoppable image. At the start of the year, it looked like prices might break down–with WTI having fallen from $110 to near $90. But a recent bounce has taken it decidedly back above $100. Signalling that the party is still continuing.
But it’s worth bearing in mind that the oil market has not been normal of late. With the loss or impairment of a number of key producing nations globally helping support prices.
One of those was Libya. Whose oil exports have been shut down completely by insurgent activity at the country’s ports.
Or at least they were until this week.
The Libyan state oil company National Oil Corp. reported this week that a tanker has arrived at the country’s Hariga terminal. With loading of a million barrels of crude for export expected to start immediately.
This is a critical milestone for the oil market. Representing the first shipment of Libyan crude since July 2013.
It could also be a wake-up call for investors. Signalling that the bullish force of supply disruptions here is on the way out.
The effect on global prices won’t be immediate. Many of Libya’s ports remain closed–and it will likely be months before full export capacity is restored.
But the spigots coming back on could start to exert gradual downward pressure on the market. Especially combined with rebounding exports from Iran–which has opened its oil supply anew after the lifting of numerous international sanctions.
It’s been a good party for oil. But we have to remember the market had a lot of things going for it. Things that may now be changing.
Here’s to turning the taps on,
Dave Forest
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