OIL – Libyan Conflict Escalation Triggers Supply Anxiety

Oil rose at the start of the week with the dollar on the back foot and the escalation of the armed conflict in Libya. Supply concerns are keeping crude prices bid with US sanctions and the OPEC+ agreement being the factors pushing crude higher.

Energy demand remains stable and with the US-China trade deal close to an official announcement a rebound is expected. Rising US production is the main factor putting downward pressure against rising crude, but for now supply anxiety has more weight on investors as spot pricing showed contango.

West Texas Intermediate graph

The fighting in Libya is not near oil producing fields, but if the conflict continues it could end up reducing crude supply. The largest oil field Sharara is near its normal production after being shut down for three months due to a salary dispute.

Brent crude graph

Saudi energy minister reassured markets on Monday that the OPEC+ ministerial meeting in May will be crucial to reach a decision to extend the production cut agreement. The OPEC has been the target of pressure from the White House in order to stop limiting production and let prices go lower. Rumour circulated that Saudi Arabia could retaliate by diversifying oil prices away from the US dollar, but those statements were denied by the Saudi energy ministry.

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza