The price of oil touched $60 per barrel briefly yesterday. This price has not been seen on this market since June of 2015 constituting a two and a half year high. News of a ruptured pipeline in Libya which removed a considerable amount of crude from the supply chain. Libya’s National Oil Company said that between 70,000 and 100,000 barrels per day of output would be lost. This is not a devastating amount of crude but hardly a trivial amount either. Remember that the Libyan product sells at the highest premium in the world above the benchmark Brent price because it is the relatively lightest in specific gravity (referred to as being “light”) and among the lowest sulfur content (referred to as being “sweet”) of anything God’s green earth offers up for humans to refine and burn. The premium arises because it is the easiest to refine and therefore the lowest physical impact on the refineries. Early reports suggest that the attack was the work of militants in Libya although this has not been confirmed. Nonetheless, coupled with the cracked pie south of Aberdeen in Scotland landing part of the Brent blend, and we see yet more reasons for price strength. Let us not forget that OPEC extended its production cuts to the end of this year. Keep your eyes on the crude oil inventory report released at the unusual time of 16:00 GMT today, delayed due to Christmas. We are expecting further reductions in inventory thereby contributing to likely higher prices as a result.
End of Year Pace Slow but Steady
Daily Analysis - 28/12/2017