Just how volatile have oil markets become?

Warring factions blocked off production at the Sharara and Wafa fields in Western Libya on March 28, shutting in a total of 252,000 barrels per day, and within days, oil markets reacted.

Brent crude rose from $50 to $51.l2 a barrel in European trading, while WTI jumped to $48.10 in electronic trade and frenzied negotiations and realignments began.

This demonstrates just how volatile oil markets have become such that the slightest disruptions results in shifts and loss grounds.

Nigeria and Libya have had serious disruptions in recent times based on insecurity from militants in the Niger Delta as in the case of Nigeria and warring factions in Libya leading to loss of market share.

Now not just disruptions but mere speculations now affect prices. Oil prices saw its biggest weekly gain this year on speculations that the Organisation of Petroleum Exporting Countries (OPEC) will extend output cuts.

Last year, OPEC countries and some non-OPEC producers agreed to slash 1.2 million bpd from output to shore prices granting Nigeria and Libya exemptions.

Muhammad Barkindo, OPEC secretary general, said that crude stockpiles are starting to decline, an indication that the supply cap deal is helping markets reliance

“I remain cautiously optimistic that the market is already rebalancing,” Barkindo told reporters on April 2, in Baghdad. “We have started seeing stock levels coming down.”

Crude futures grew 5.5 percent in New York last week, climbing back above $50 a barrel following positive vibes from Kuwait regarding the output cap deal.

Issam Almarzooq, Kuwait Oil Minister, indicated support for the oil cap deal and hinting his country will be amenable to extend the cuts beyond June when it is up for review.

But OPEC does not look capable of sustaining this gain due to the threat from shale producers, who are ramping up capacity as advance in fracking technology means they could still produce at sub $50 oil price.

Higher prices as a result of the OPEC cuts will encourage more US shale production, US State Department official Alan Eyre said at a Baghdad energy conference insisting that current oil prices of around $50 is the new normal.

Oil markets also reacted to a US government report which revealed that refiners in US refined the most crude in three years in the first three months of 2017 and oil prices saw the biggest quarterly loss since 2015.

Oil futures also witnessed uninspiring performance with contracts posting some of the biggest monthly losses since July last year as US crude inventories and drilling activity counterbalanced production cuts in other places.

The implication is that the stakes are now higher and it has become imperative for oil producers to ensure that there are no disruptions to production.

A key reason is that Asian markets were demand growth is still recorded, markets now have too many supply options.

With shale producers ramping up capacity to over 9.1million bpd, the prospect of oil markets counterbalancing in 2017 as analysts have forecasted looks slim and chances for a $60 oil look does not even look very promising.

ISAAC ANYAOGU