Why oil futures climb on

Quantum Commodity Intelligence
Why oil futures climb on

Crude oil futures Thursday were up on the day as production worries around Libya and Russia came back to the forefront, but broader economic concerns and record US exports pared gains, Quantum Commodity Intelligence writes.

Front-month June ICE Brent futures were trading at $107.78/barrel (1923 GMT), compared to Wednesday’s settle of $106.80/b, but off from Thursday's earlier high of $109.80/b. At the same time, June NYMEX WTI was trading $103.24/b, versus Wednesday’s settle of $102.19/b.

Libya reiterated Wednesday that the country continued to lose more than 500,000 barrels per day of crude sales, while reports said that Russian exports continued to decline in April amid increased self-sanctioning. EU ministers were still weighing up a sixth round of energy sanctions and while an outright oil ban looks unlikely, further financial measures could add to restrictions on lifting Russian barrels. Germany said it is moving "as fast as possible" to end its reliance on Russian energy, but it will take time.

On the downside, the market is still reeling from the sharp downgrade in global growth prospects by the IMF for this year, while both the IEA and OPEC see weaker oil demand growth. US combined crude oil and product stocks hit their lowest level since March 2014 in the third week of April as total petroleum exports hit a fresh record of 10.6 million bpd, the latest weekly EIA data revealed Wednesday.

"Given the structural changes we are seeing in the global oil market regarding Russian supply, along with the expected growth in US crude oil output, we would expect that the US becomes an even larger net exporter of oil and products in the months and years ahead," said Warren Patterson, head of ING's commodity research.

Oil and products exports jumped by 1.6 million bpd on the week – its sharpest weekly gain in a year – as overseas buyers scrambled for US volumes after the loss of Russian barrels started to bite. It was the second time in US history that combined petroleum exports surpassed the 10 million bpd mark.