Six factors that may put a brake on oil rally
* Global oil supply glut has started to wane after OPEC cuts
* Upsurge in crude production in Iran and Libya, a strong dollar and a likely recovery in US oil output may dampen enthusiasm
* Iran and China are other factors
Members of the Organization of the Petroleum Exporting Countries (OPEC) have significantly reduced oil production in accordance with an agreement made by the cartel last year.
As a result, global oil supply glut has started to wane gradually and crude prices have been on a rise with benchmark Brent Blend set to touch the psychological mark of $60 per barrel.
Saudi Arabia, Kuwait, UAE and Iraq have begun to reduce their produce to match their commitment of a cut of 1.2 million barrels per day from January 1, 2017. Producers from outside the 13-country member group have agreed to cut production by 558,000 bpd under the OPEC deal to support prices.
However, there are a few developments taking place simultaneously which can potentially risk the oil price rally. Upsurge in crude production in Iran and Libya, who are exempted from the OPEC deal, a strong dollar and a likely recovery in US oil output may cast a shadow over the long-awaited enthusiasm.
Iran’s ramp up
Iran won an exception from the global pact after it argued that it should not limit its production which was slowly starting to recover after the lifting of international sanctions in January last year.
The country’s English-language Press TV reported on Friday that state-owned National Iranian Oil Company (NIOC) was negotiating with the Philippines over exporting four million barrels of crude per month to the Southeast Asian country.
China’s Iranian crude oil imports may rise to a record this year as state-owned oil firms lift more crude through their upstream investments while extending their current supply contracts, Reuters reported a day earlier citing senior industry and trading sources.
Sources told the UK-based news agency that Tehran had already been offering aggressive discounts, aiming to coax buyers globally into stocking up for winter in anticipation of the OPEC cut, it reported on Sunday.
Libya lifts blockade
Libya’s oil production is close to 700,000 barrels per day after the restart of two major oil fields after a two-year blockade was lifted three weeks ago. Even though the national output remains far below the more than 1.6 million bpd that Libya was producing before its 2011 uprising, the National Oil Corporation says it hopes to raise production to nearly 900,000 bpd by March.
Lebanon restarts tenders
In a major breakthrough, Lebanon’s new cabinet passed two decrees last week to allow the government to restart its first oil and gas licensing round after a three-year delay.
Initially, it will offer five offshore blocks for exploration and production. The Lebanese government has estimated with a probability of 50 percent it has 96 trillion cubic feet of natural gas reserves and 865 million barrels of oil offshore.
Meanwhile, Iraq has said that the autonomous Kurdish region was exporting more than its allocated share of oil as the country seeks to comply with the OPEC output cut.
(With inputs from Reuters)