The price of crude oil has fallen on international markets on the strength of suggestions from Libya that it would step up its production. The news was enough to trigger the largest one day fall in the price of Brent crude oil seen in over two years with the price of a barrel of Brent plunging by 6.9% to stand at $73.4, a level last seen in the middle of June, but a level not sustained since March. The decline also affected US crude which dipped by five percent to £70.38 per barrel, the worst one-day fall it has seen in a year.
The Libyan National Oil Corporation announced that they would re-open four oil terminals that were taken off-line in late June, virtually closing down the nation’s output.
Oil prices rallied in Q2 with Brent crude rising by a shade over 18% during the quarter on the back of a two-month rally in global oil prices. The Libyan news reinforces market jitters that the global (or nearly) trade war the Trump administration is waging will hit demand, depressing the oil price which Trump had argued was too high anyway. The most recent raft of US trade tariffs, against China, are likely to put 10% on some $200 billion worth of products.
The recent rally in oil prices had pushed them to a two-year high. It had been subject to some fluctuation over concerns that the US would seek to re-impose sanctions on Iranian oil in the wake of the US decision to unilaterally withdraw from the international nuclear agreement with Iran designed to limit its supposed nuclear weapons ambitions. However, the US’s allies are keen to maintain the deal and have no intention (at the moment) of reinstating the sanctions.
The decline in the oil price happened despite the fact that the US stockpile of oil has been drawn down by 4% relative to their level last year at this time, equating to about 12 million barrels.