The Week In Hindsight, 23 May 2014
Reports throughout the week of ongoing unrest in Libya, including one of the Prime Ministers kidnapping, have continued to drive Brent prices higher. The still fraught situation has compromised the return of full Libyan production to the world’s oil markets.
Since rebels seized the nation’s ports in the aftermath of Gaddafi’s downfall, Libyan oil production has fallen by nearly 85% and global oil markets have lost 850,000 barrels per day of production.
The north African drama came as violence continued to be the preferred means of diplomacy in Ukraine. This was as the worst outbreak of fighting since the crisis began left sixteen of Kiev’s soldiers dead.
While unrest prevails across a number of exporting countries and tensions in Ukraine continue to simmer, we expect Brent to remain well supported at or around $108 per barrel with a bias toward further gains.
WTI crude made good headway upon last week’s closing price as worsening conflicts across a number of global production hubs continued to threaten supplies. In addition to this, the EIA’s weekly energy report showed stockpiles in some parts of the US being drawn down to their lowest levels since the height of the polar vortex in January this year.
While the supply side argument continues as the main driver of prices at present, we continue to expect a rebound in US economic data to make a positive contribution to support for prices over the weeks and months ahead.