Oil heads for weekly loss as Libya, Dollar weigh against cuts

Oil headed for a weekly loss as Libya prepared to raise supply and the dollar strengthened, offsetting the impact on prices from an agreement by OPEC and other producers to cut production.

Futures dropped 0.6 percent in New York, poised for a 1.8 percent weekly decline. Libya reopened one of its biggest oil fields and was preparing the first crude shipment in two years from its largest export terminal, Es Sider. The U.S. dollar is headed for its biggest weekly gain in almost a month against major peers after the Federal Reserve raised interest rates. Goldman Sachs Group Inc. increased its second quarter oil price forecasts and predicted inventories would return to normal levels by the middle of 2017.

“Focus is shifting to the current lackluster fundamentals,” analysts at Goldman Sachs including Damien Courvalin in New York wrote. “We expect the ramp-up in Libya and a stronger dollar will likely further limit the near-term upside to prices.”

Oil has traded near $50 a barrel since the Organization of Petroleum Exporting Countries agreed Nov. 30 to trim output for the first time in eight years. A broader deal reached last weekend in Vienna with 11 non-members including Russia encompasses countries that produce about 60 percent of the world’s crude. A significant increase in Libya, which is exempt from cuts, could mean other nations have to make bigger reductions in order to achieve the targeted production level of 32.5 million barrels a day.

West Texas Intermediate for January delivery slipped 30 cents to $50.60 a barrel at 10:20 a.m. in London. The contract fell 14 cents to close at $50.90 on Thursday. Total volume traded was about 25 percent below the 100-day average. Prices closed at the highest since July 2015 on Tuesday.

Libyan Output

Brent for February settlement slipped 24 cents to $53.78 a barrel on the London-based ICE Futures Europe exchange. Prices climbed 12 cents to $54.02 a barrel on Thursday. The global benchmark crude traded at a premium of $2.12 to February WTI.

Libya’s El Feel, or Elephant, field started pumping oil to the Mellitah energy complex on Thursday and is expected to reach output of 75,000 barrels a day within a week, said Khaled Hadloul, an engineer at operator Mellitah Oil & Gas. Repsol SA-operated Sharara, Libya’s largest field, will soon pump crude to the Zawiya refinery after pipelines reopened Wednesday, said Mansur Abdullah, manager of the plant’s oil flows.
Goldman raised its second quarter WTI price forecast to $57.50 a barrel from $55, and its Brent forecast for the same period to $59 from $56.50, according to a report Friday. If stockpiles held by countries in the Organisation for Economic Co-operation and Development fall, which the analysts see happening in the second quarter of next year, prices could rise.

The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, was little changed, heading for a 1.1 percent weekly gain, the most since Nov. 18. A stronger dollar makes commodities priced in the currency less attractive to investors.