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Restarting the Wintershall Oilfields in Libya Could Impact Oil Prices

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Crude oil futures

March WTI crude oil futures (UWT) (DBO) rose 0.7% to $64.02 per barrel at 1:25 AM EST on January 23, 2018. Prices are near three-year highs. It supports funds like the iShares U.S. Energy ETF (IYE) and the iShares Global Energy ETF (IXC). These funds have exposure to US oil and gas companies.

March E-mini S&P 500 (SPY) futures contracts rose 0.16% from their previous settle to 2,840 at 1:25 AM EST on January 23, 2018.

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Libya restarts Wintershall AG’s Sara oilfield

On January 21, 2018, the NOC (National Oil Corporation) of Libya said that it would restart the Wintershall AG’s Sara oilfield. NOC is a state-owned oil company.

The oilfield had been shut down due to protests in Libya. The oilfield can produce 57,000 bpd (barrels per day) of crude oil. It could add to Libya’s crude oil output.

In January 2018, oil majors like Shell (RDS.A) and BP (BP) agreed to buy Libya’s crude oil. The recovery in Libya’s crude oil production is one of the key factors for this agreement.

Libya’s crude oil production 

According to the EIA, Libya’s crude oil production dropped by 20,000 bpd to 970,000 bpd in December 2017—compared to the previous month. Production declined 2.1% month-over-month but increased by 350,000 bpd or 56.5% year-over-year. Production was near a four-year high due to the restart of the Sharara oilfield in September 2017. The oilfield contributes 25% of Libya’s oil production. The oilfield was closed due to militant attacks in August 2017.

Any increase in production from Libya is bearish for oil (BNO) (UWT) prices. Lower oil (SCO) prices have a negative impact on oil producers (FXN) (IEZ) like Denbury Resources (DNR), Devon Energy (DVN), and Noble Energy (NBL).

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Libya and production cuts 

Libya was exempt from ongoing production cuts due to economic issues. Libya’s oil production averaged 820,000 bpd in 2017, while it averaged 385,000 bpd in 2016.

Impact 

Libya’s crude oil production has risen 400% since August 2016. Libya plans to increase its oil production in 2018 despite production cuts. Any increase in Libya’s crude oil production could weigh on oil (BNO) (USO) prices.

Next, we’ll discuss Cushing inventories.

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