Oil futures fell on Wednesday after Libya said it expects will boost production over the next few months and a report showing a surprise build in U.S. crude inventories last week.
Brent futures for February delivery were down 95 cents, or 1.7 percent, at $54.40 a barrel by 1:40 p.m. EST (1840 GMT). U.S. West Texas Intermediate crude for February was down 85 cents, or 1.6 percent, to $52.45 per barrel.
Even though WTI futures for February were down, the U.S. front-month was still up about 0.4 percent due to the contract roll from lower-priced January to higher-priced February on Tuesday.
“The big news of the day is that it looks like we’re going to get more crude out of Libya,” said James Williams, president of energy consultant WTRG Economics in Arkansas.
Libya’s National Oil Corporation (NOC) confirmed on Tuesday that pipelines leading from Sharara and El Feel fields had reopened, saying it hoped to add 270,000 barrels per day (bpd) to national production over the next three months.
“The big question is what will OPEC do about the Libyan increase. With Libya excluded from the production cut agreement, I anticipate the Saudis will unilaterally balance the Libyan crude,” WTRG’s Williams said.
On 30 November, OPEC agreed to cut output by 1.2 million bpd for six months from 1st January, with top exporter Saudi Arabia cutting around 486,000 bpd. On 10th December, non-OPEC countries including Russia agreed to reduce output by 558,000 bpd, the largest-ever contribution by non-OPEC producers.
In the United States, U.S. crude stocks rose by 2.3 million barrels in the week to 16th December as refineries hiked output, while gasoline stocks and distillate inventories fell, the U.S. Energy Information Administration said.
That was the first weekly build in crude stockpiles in five weeks. Analysts were expecting U.S. crude inventories to fall by 2.5 million barrels.
Scott Shelton said“energy special at ICAP in Durham, North Carolina. The EIA report diverged widely from the American Petroleum Institute industry group’s data released late Tuesday, which showed a larger-than-expected 4.1-million-barrel crude draw”.
Oil markets are expected to remain well-supplied despite the planned OPEC and non-OPEC reductions.
Russia’s 2016 oil output is expected to total 547.5 million tonnes (11 million barrels per day), a 2.5 percent increase from last year, Energy Minister Alexander Novak told reporters.