Supply outages, industrial action trigger fresh oil market rally

Major supply outages in Libya and expected shutdowns in Norway sparked a rally in global oil prices on Friday, with benchmark prices rising more than 3% despite concerns that an economic slowdown could slow down demand.

On Friday, Brent crude futures were up $3.03, or 2.8%, at $112.06 a barrel by 1157 GMT, having dropped to $108.03 a barrel earlier in the session. Benchmark WTI crude futures meanwhile gained $2.84, or 2.7%, to $108.60 a barrel, after retreating to $104.56 a barrel earlier. Both contracts fell around 3% on Thursday, ending the month lower for the first time since November.

According to analysts, oil is in a secular bull market and therefore the longer-term tailwinds supporting higher prices will continue to be in play. Several analysts have pointed out that the current pattern of oil price could send WTI to record levels above its 2008 historic high of $147.

The global energy industry will “still see risks to prices as skewed to the upside on tight inventories, limited spare capacity and muted non-OPEC+ supply response,” Barclays said in a note.

In Libya, the National Oil Corporation declared force majeure at the Es Sider and Ras Lanuf ports as well as the El Feel oilfield, while force majeure is still in effect at the ports of Brega and Zueitina, the company said.

Production at the facility has seen a sharp decline, with daily exports ranging between 365,000 and 409,000 bpd, a decrease of 865,000 bpd compared to production in “normal circumstances,” NOC said.

The news came as 74 Norwegian offshore oil workers at Equinor's Gudrun, Oseberg South and Oseberg East platforms said they will go on strike from July 5, thereby impacting about 4% of Norway's oil production.

On Thursday, the OPEC+ group of oil producers agreed to retain its output strategy in its monthly meeting, although there was no clear indication of production policy from September onwards.

OPEC+ had earlier decided to increase output each month by 648,000 barrels per day (bpd) in July and August, up from a previous plan to add 432,000 bpd per month.