Oil Closes Lower As Libya Ramps Up Production

On Tuesday, oil closed lower as Libya has started to increase its production output. OPEC reducing output has been doing well, but not enough to counter the global oil glut. U.S. crude output continues to increase as refiners are raising output. WTI crude oil closed lower by 2.4% to $47.66 a barrel. Brent crude oil closed lower by 2.3% to $50.35 a barrel.

Oil Ramp Up

Oil was pressured lower because Libya revealed a very large increase in stockpiles. This week the National Oil Corporation, which is the country’s oil council, stated that its production levels breached 760,000 barrels a day. The problem with that is that it is the highest level since December of 2014. Oil inventories heading back up to 2014 levels is not bullish at all.

That is going backwards. It would be fine if it ended there, but the Chairman of the National Oil Corporation Mustafa Sanalla states there will be a production increase. That means that Libya is gunning to eventually reach 1.1 million barrels of oil per day. Not a good thing at all considering that the whole point ofthe OPEC deal was to cut production.

Not that it matters much for Libya because it is actually exempt from the deal. That doesn’t change the fact that the country will be bringing additional oil supply to an already overcrowded market.

OPEC Deal On Track

Last year, OPEC garnered a deal to cut oil output. This deal was reached between OPEC and other nations such as Russia. The deal was to cut up to 1.8 million barrels of oil per day in the first half of 2017. There will be a meeting held on May 25 to continue to maintain the output cuts.

This will be a necessary step to ensure that supply doesn’t start to get out of hand again. Things remain on track for now. OPEC oil output has dropped for the fourth-month in a row, and that is a good thing. OPEC output is now at 31.97 million barrels of oil per day as of April.

Russia has done its best to maintain itself under its goal as well. Russia reported that it had fallen down to an output of 11 million barrels of oil per day. Not under the target proposed by OPEC, but close to it.