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Crude-oil prices headed sharply lower on Tuesday as investors worries about growing global supplies overshadowed a supply disruption in the Middle East due to unrest in Libya and Iraq.
“Oil rally fades as investors started to factor in the reality of supply and demand,” wrote Naeem Aslam, chief market analyst at AvaTrade in a daily research note.
West Texas Intermediate crude futures for March delivery US:CLF20 fell 67 cents, or 1.1%, to trade at $57.91 a barrel on the New York Mercantile Exchange. The February contract CLG20, -0.94%, which was down 73 cents, or 1.3%, at $57.81 a barrel, is set to expire at Tuesday’s close.
There was no regular trading or settlements of WTI on Monday in observance of the Martin Luther King Jr. holiday.
March Brent oil BRNH20, -1.30%, the international benchmark, was down 96 cents, or 1.5%, to $64.25 a barrel on ICE Futures Europe.
Tuesday’s move comes after Brent last week saw a weekly loss of about 0.2%, while WTI saw a nearly 0.9% weekly skid.
Crude markets had briefly punched higher in electronic trade after the largest oil field in Libya shut down production following an armed forces cut off a pipeline and blocked exports. Reuters reported that pipeline blockades in the east and west of the country have hindered oil production and forced the stoppage of production.
Libya has been producing about 1.2 million barrels a day, according to reports, however, that is small compared with global output.
“Libyan oil production makes a very small part of global oil supply, and right now, the issue is with demand rather than supply,” wrote Aslam.
Market participants have pointed to growing supplies from shale producers in the U.S. has one of the biggest headwinds to sustained crude gains.
Baker Hughes BKR, +0.43% reported Friday that the number of active U.S. oil rigs rose by 14 to 673 this week, marking the first rise in
“There is simply too much global supply, and too little global demand for Middle East crude oil to rally the market like it is 1999,” wrote Robert Yawger, director energy at Mizuho Securities USA, in a Tuesday research note.
Separately, striking security guards forced the stoppage of work on an oil field in Iraq, according to reports.
Barbara Kollmeyer contributed to this report.
