The Commodities Feed: Libyan Output Set To Increase Further

Your daily roundup of commodity news and ING views.

Energy

Oil remains under pressure, with ICE Brent falling towards US$41/bbl (BNO). The recent surge in COVID-19 cases and further movement restrictions across parts of Europe is weighing on sentiment, with concern over what this all means for demand. Not helping, is the fact that Libya appears to be returning supply to the market quicker than expected. Libya’s National Oil Corporation has lifted force majeure at Es Sider and Ras Lanuf ports, while the NOC has said that it expects the country’s output to reach 800Mbbls/d within 2 weeks, and 1MMbbls/d within four weeks. Libya has been quick to bring production back online following the lifting of an export blockade and is now producing in the region of 500Mbbls/d. In an environment where there are renewed worries over the demand outlook, the last thing the market needs right now is additional supply.

In Canada, Alberta has decided to end its mandated production cuts early. The production limits were set to expire on 31 December. However, they will now be lifted as of December, with COVID-19 meaning that producers in Alberta are already producing below the production limits. According to data from the province, Alberta produced 3.1MMbbls/d of oil in August, well below the 3.81MMbbls/d production limit. Canada has had production limits in place since January 2019, with production in the region exceeding pipeline export capacity. However, with the COVID-19 supply hit, production is not expected to reach pipeline capacity at least until mid-2021.

Latest data from Baker Hughes shows that the number of active oil rigs in the US increased by 6 over the last week to total 211. This is the fifth consecutive week of increases and takes the total rig count back to levels last seen in May. The total number of oil rigs still remains well below the 683 seen back in mid-March.

Finally, latest positioning data shows that speculators increased their net long in ICE Brent by 20,022 lots over the last reporting week, leaving them with a net long of 140,130 lots as of last Tuesday. The bulk of this move was driven by fresh buying, with the gross long position increasing by 15,070 lots. Meanwhile looking at NYMEX WTI, the speculative net long increased by 38,431 lots over the last week, to total 332,260 lots as of last Tuesday. The increase in the net position was driven fairly evenly by both fresh buying and short covering.

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