Oil rose towards $56 a barrel on Monday, supported by another shutdown at Libya’s largest oilfield, tension over Syria following the U.S. missile strike and signs that an OPEC-led supply cut is helping to clear excess supplies.
Libya’s Sharara oilfield was shut on Sunday after a group blocked a pipeline linking it to an oil terminal, a Libyan oil source said. The field had only just returned to production, after a week-long stoppage ending in early April, reports Reuters.
“It means that at least one potential source of additional supply has fallen away for the time being,” said Carsten Fritsch of Commerzbank, referring to the Libyan outage.
A motorist holds a fuel pump at a Gulf petrol station in London
Brent crude LCOc1, the global benchmark, rose 58 cents to $55.82 at 1332 GMT, not far from the one-month high of $56.08 reached on Friday. U.S. crude CLc1 was up 55 cents at $52.79.
Oil also climbed on heightened tension in the Middle East, a region that is home to more than a quarter of the world’s oil output. Crude rallied last week after the United States fired missiles at a Syrian government airbase.
“The developments in Syria should be factored in as an additional risk premium in the oil price going forward, especially now that oil inventories are drawing down and the market is no longer in massive surplus,” said Bjarne Schieldrop, an analyst at SEB.
He expects Brent to average $57.50 in the second quarter, “which means we are likely to see $60 printed at times during this period.”
Oil prices have also been supported by a deal led by the Organization of the Petroleum Exporting Countries to cut output by 1.8 million barrels per day for the first six months of 2017, to get rid of excess supply. Libya and another OPEC member Nigeria are exempt from cuts.
In a sign of OPEC confidence that the deal is working, Kuwait’s oil minister said he expected producers’ adherence in March to their supply cut pledges to “be higher than a previous couple of months.”
The minister, Essam al-Marzouq, also said he saw “positive indications” in the decline of global oil stocks. However, the price rally has been limited, as oil price gains have encouraged production in other countries such as the United States, filling some of the gap left by OPEC-led cuts.
U.S. drillers added oil rigs for a 12th straight week, Baker Hughes said on Friday, as energy companies boost spending on new production.