By Adedapo Adesanya
Oil prices returned to the positive territory on Monday as a result of by supply restrictions reports from Iraq and Libya.
It was reported that Iraq, a top oil giant, was planning to cut production, while reports also emanated from Libya that a pay dispute has caused disruptions in the production of the commodity.
These reports offered more support to the price of crude oil at the global market yesterday as the Brent crude futures rose by 48 cents or 0.87 per cent to trade at $55.87 per barrel, while the West Texas Intermediate (WTI) crude futures improved by 54 cents or 1.01 per cent to sell at $52.80 per barrel.
Iraq, a key laggard under the agreement by the Organization of the Petroleum Exporting Countries and its allies (OPEC+), plans to produce 3.6 million barrels a day of oil in January and February, news reports said, which would fall below the 3.86 million barrels a day allowed.
OPEC+ agreed in April last year to slash output and bolster oil prices, which had been hammered by the spread of the coronavirus. Iraq and other members, including Nigeria, have constantly faced criticism for pumping above their caps and called on them to make compensatory cuts.
With this move, Iraq has shown that it is still committed to the OPEC+ deal, which runs until next year.
Its decision to pump less oil follows a similar action by Saudi Arabia earlier this month. With the virus still raging, the kingdom said it would reduce production in February and March by one million barrels daily, a surprise move that caused oil prices to rise.
The oil market can only benefit from more production curtailments as bearish signals are coming from the demand front, with COVID-19 infections continue to expand globally.
Also providing support on Monday were reports that Libya’s Petroleum Facilities Guard halted all oil exports from the ports of Ras Lanuf, Es Sider and Hariga due to a pay dispute.
Libya had previously seen a recovery in oil output, producing more than 1.2 million barrels a day in December after producing less than 100,000 barrels a day in August, a move that threatened oil prices.
Libya resumed oil exports in September after a blockade of ports and oilfields by Haftar’s forces ended. According to the country’s National Oil Corporation, Libya produces 1.25 million barrels of crude oil per day, this means that the halt would reduce the amount of oil pumped into the market.
Investors also showed confidence as US President Joe Biden continue to push for quick approval of his proposed $1.9 trillion pandemic relief package.
In the latest round of discussion, officials in Mr Biden’s administration on a Sunday call with Republican and Democratic lawmakers tried to head off Republican concerns that his pandemic relief proposal was too expensive.
Meanwhile, the expanding lockdowns in China, the world’s second-largest oil consumer and largest importer continue to worry investors.
The country’s National Health Commission reported 124 new cases of confirmed infections, up from 80 a day earlier with a tally of 15 serious cases reported on Sunday. This increase added to oil demand fears as the country tightened lockdowns and imposed restrictions to battle the spread of the virus.
Meanwhile, some European countries like the UK, France and Spain are also preparing to take additional measures by prolonging and tightening lockdowns to combat the resurgence in cases. Spain reported 42,885 more coronavirus infections, the second-highest daily surge since the pandemic began.
