Libya's oil output nears 1 million bpd, highest in four years

Oil market remains volatile

Oil market remains volatile

OPEC has lost its grip on the oil market, but oil prices will likely set a bottom in the low $40s per barrel, according to the latest CNBC Oil Survey.

Oil had a mixed month during June as it did not find much support from the OPEC members who left it to the mercy of the production and the inventory data and this hit the oil prices hard during the major part of the month, though the prices did recover towards the close of the month.

Goldman Sachs made some headlines when it chose to dramatically lower its oil price forecast for 2017, dropping its prediction by $7.50 per barrel to $47.50.

Goldman's warning that rising supply would offset expected inventory declines and weigh on oil prices comes after Bank of America Merrill Lynch and oil and gas consultancy FGE said that oil prices are headed into the US$30s if OPEC doesn't make steeper cuts.

Frustration about the slow pace of market re-balancing will continue to weigh on prices going ahead as well. This incredibly fast reaction time compares to 3 to 10 year cycles for most non-shale non-Opec projects. Robust appetite from Japanese and South Korean buyers could help soak up excess supplies. Its year high is $54.45.

Export opportunities to Asia and big USA summer driving demand - expected to hit a record this weekend - are seen as the primary drivers for a drawdown in stocks that have remained stubbornly above seasonal averages.

Libya's output has rebounded from only 690,000 barrels a day at the start of the year, with Sharara, the country's largest oil field, resuming production last month. Oil rig count has been increasing since June 2016 and is now at its highest since April 2015.

Other analysts, however, believe that the trend of rising output may soon abate and the weekly fall in the US oil-rig count backed that up. The United States has seen its own oil output jump 550,000 barrels per day since last November, when these petrostate cuts were first announced.

USA production, by contrast, represents a wide variety of crude oil grades.

At near one million bpd, Libya has succeeded in beating a production target the National Oil Corp (NOC) announced recently by a month, the source added. Since January 2017, shale production has started to edge up and is now nearly back near its peak. It is however in OPEC's interest to wrap up its oil victory in price, volume produced and sold to give the desired revenue and bull market share.

On the inventory side, U.S. oil inventories fell by 0.8 per cent MoM in June to 509.2 million but were 3.1 per cent higher YoY.

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