MOSCOW, September 9 (RIA Novosti) – Oil prices slump as the geopolitical tensions in Ukraine and the Middle East ease and Libya increases crude oil production.
"Investors moved into oil in June looking for a hedge against the uncertainty generated by the advance of Isis in Iraq and fears of an oil price spike negatively impacting other asset classes like equities," Financial Times reported Harry Tchilinguirian, global head of commodity markets strategy at BNP Paribas, as saying Monday. "But this unravelled when production remained intact. The return of Libyan production has really helped to move the price lower and has extended the deleveraging process out of oil," he added.
October contracts for Brent crude oil fell below the symbolically important $100 threshold Monday to an intraday low of $99.36 a barrel – the lowest since May 2013. Currently it is trading at about $100.08 a barrel, according to Bloomberg.
Underlying the fall are abating geopolitical upheavals and the gradual increase in Libyan supplies. In addition, an excess of oil in the Atlantic Basin and the North Sea has compounded the effects of greater North American production.
"I suspect oil cannot fall further than $90 a barrel," USA Today quoted Wells Fargo Advisors investment strategist Paul Christopher as saying Monday. "Saudi Arabia and other OPEC members will start cutting production if oil continues to fall like this."
Nevertheless, analysts note that the current sentiment may easily shift if geopolitical tensions flare up again and increase the risk of supply disruptions.
The Libyan 340,000 barrels per day El Sharara oilfield resumed operations in mid-July after protesters ended a four month strike. Restart of the oilfield may double the country"s previously humble crude output. According to the authorities" data, crude oil output reached the level of 207 thousand barrels Monday in comparison with 60 thousand Saturday. Some experts say increase in Libyan output may prompt other OPEC members to cut their production in order to maintain price stability.
