Crude oil prices drop on prospect of returning Libyan supplies

LONDON: Oil prices slipped on Tuesday amid rising COVID-19 cases and a possible return of Libyan oil production, which has been down to a trickle since the start of the year.

The more-active September contract for Brent fell 22 cents, or 0.5 per cent, to $41.63 a barrel by 0832 GMT, paring Monday’s 92 cent gain. The August contract, which expires on Tuesday, fell 26 cents to $41.45.

US crude was down 27 cents, or 0.7 per cent, at $39.43 a barrel.”Attempts to push prices higher are capped by growing concerns about the second cycle of the coronavirus or the inability to contain the current one,” Tamas Varga of oil brokerage PVM said.

Coronavirus cases continue to rise in southern and southwestern US states. Investors are watching to see whether Libya is able to resume exports, which have been almost entirely blockaded since January amid the country’s civil war.

“If we do finally see a resumption in Libyan output, this would make the job of OPEC+ a little bit more difficult, as Libya pumped at around 1 million barrels per day (bpd) prior to the disruptions.” ING said.

Investors will also be looking for signs of demand recovery in data due on Tuesday from the American Petroleum Institute industry group and from the US government on Wednesday.A preliminary Reuters poll showed analysts expect US crude oil stockpiles fell from record highs last week and gasoline inventories decreased for a third straight week.

Royal Dutch Shell, the world’s largest fuel retailer, said it expects a 40 per cent drop in fuel sales in the second quarter from a year earlier to 4 million bpd.Stronger-than-expected Chinese factory data, and a drop in Iraq’s June oil exports helped cap bigger losses.