(Bloomberg) — Oil rose with the shutdown of Libya’s biggest oil field, which is straining an already under-supplied market and overshadowing signals that China’s lockdowns are weighing on its economic growth.
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Brent crude futures rose above $113 a barrel for the first time since late March and West Texas Intermediate traded around $108. Global markets face further interruptions to oil supplies after demonstrations against Libya’s Prime Minister Abdul Hamid Dbeibah shut down Sharara, the country’s biggest oil field. Protesters also forced two Libyan ports to stop loading, with output halted at the El Feel field.
Earlier, prices fell as Chinese economic data signaled bearish news for the market. China reported its biggest decline in consumer spending and worst unemployment rate since the first months of the pandemic, adding another threat to global growth.
Oil rallied above $100 this year as the war in Ukraine disrupted an already-tight market, with some traders shunning Russian crude. The surge in prices spurred the U.S. and allies to announce the release of millions of barrels from strategic reserves to quell inflationary pressures. Nonetheless, global supplies remain tight with the European Union considering banning Russian crude and with OPEC+ declining to raise their output pace.
A key oil market indicator suggests that bullish sentiment is rising. Brent so-called prompt spread, the difference between its two nearest contracts, surged to $1.15 a barrel, up from 21 cents a week ago. The recent rebound comes as European Union is considering banning Russian oil and gas exports, exacerbating an already tight market.
Any “embargo decision by the EU would be a catalyst for even higher oil prices,” said Pavel Molchanov, an analyst at Raymond James & Associates Inc. “Realistically, it would not be viable to replace” all of the crude that would be disrupted from a European Union ban on Russian crude.
Russia’s Deputy Prime Minister Alexander Novak said last week that if more nations banned Russian energy flows, prices may “significantly exceed” historic highs. The U.S. and U.K. have moved to bar crude from the country after Moscow’s invasion of Ukraine.
In a weekend phone call, Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman gave a “positive assessment” of their efforts to stabilize the oil market, suggesting that no change in production policy is likely. The two nations lead the alliance that groups the Organization of Petroleum Exporting Countries and its partners, known as OPEC+.
Oil’s surge this year has been part of a wider advance in energy commodities that’s seen prices extend gains even as the outlook for global economic growth dims. On Monday, U.S. natural gas prices hit the highest level in more than 13 years as robust demand tests drillers’ ability to expand supplies.
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