Oil Drops as Kazakhstan, Libya Concerns Ease

By Adedapo Adesanya

Oil edged lower on Friday as the market weighed supply concerns from the unrest in Kazakhstan and outages in Libya, causing the Brent crude to lose 5 cents or 0.06 per cent to trade at $81.94 per barrel, with the United States West Texas Intermediate (WTI) crude falling by 37 cents or 0.47 per cent to sell at $79.09 per barrel.

On a weekly basis, Brent and WTI gained about 5 per cent in the first week of the year, with prices at their highest since late November, spurred on by the supply concerns.

On Friday, after analysing the events in Kazakhstan, the market eased whatever concern it had especially after the country’s President said constitutional order had mostly been restored, a day after Russia sent troops to put down an uprising.

The protests began in Kazakhstan’s oil-rich western regions after state price caps on butane and propane were removed on New Year’s Day.

Production at Kazakhstan’s top oilfield Tengiz was reduced, according to its operator Chevron Corp, as some contractors disrupted train lines in support of protests taking place across the central Asian country.

Production in Libya has dropped to 729,000 barrels per day from a high of 1.3 million barrels per day last year and this had worried the market over the week.

The loss also occurred as the market came under pressure after US employment figures missed expectations.

Employment in the largest oil-producing country increased less than expected in December amid worker shortages, and job gains could remain moderate in the near term as spiralling COVID-19 infections disrupt economic activity.

Meanwhile, supply additions from the Organisation of the Petroleum Exporting Countries, Russia and allies – together called OPEC+ – are not keeping up with demand growth.

OPEC’s output in December rose by 70,000 barrels per day from the previous month, versus the 253,000 barrels per day increase allowed under the OPEC+ supply deal which restored output slashed in 2020 when demand collapsed under COVID-19 lockdowns.

Crude inventories in the US have fallen for six consecutive weeks by the end of the year to their lowest since September.

Meanwhile, the Omicron coronavirus variant is rapidly taking hold, demand-side concerns are easing amid rising evidence that it is less severe than previous variants.