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Crude oil prices rangebound after Libya's NOC lifts force majeure

Singapore — 0315 GMT: Oil futures were caught in a range during the mid-morning trade in Asia Sept. 21, even as Libya's state-owned National Oil Corp. lifted the force majeure on oil fields and ports on Sept.19, raising concerns of oversupply in a market plagued by demand uncertainty.

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At 11.15 am Singapore time (0315 GMT), ICE Brent November crude futures were trading at $43.19/b, up 0.04 cents/b (0.09%) from the Sept. 18 settle, while the NYMEX October light sweet crude contract was at $41.14/b, up 3 cents/b (0.07%).

Libya's NOC lifted the force majeure on oil fields and ports, excluding facilities where militants are still present, after the Libyan National Army's leader Khalifa Haftar said on Sept.18 in a public broadcast that a blockade on oil exports, effective since Jan. 18, would be lifted immediately.

The lifting of NOC's force majeure could result in the return of up to 1.1 million b/d of crude oil that Libya had been pumping to the market before the blockade was imposed, marking a significant increase over the 100,000 b/d pumped during the blockade.

The return of Libyan crude could add to the woes of the OPEC+ coalition, which has been struggling with non-compliance issues from members as it tapers its oil output cuts to 7.7 million b/d from August onwards, from the 9.7 million b/d cut mandated from May through July.

While the OPEC+ meeting held on Sept. 17, during which Saudi energy minister Prince Abdulaziz bin Salman secured commitments from compliance laggards to compensate for their excess production, boosted market sentiment, traders are now concerned over the prospect of additional oil from Libya amid weak demand.

"The market can ill afford more crude hitting the market," ANZ analysts said in a Sept. 21 note. They reasoned that "The resurgence in COVID-19 infections around the world has seen many governments halt the easing of restrictions".

Stephen Innes, chief global markets strategist at AxiCorp , echoed a similar sentiment in a Sept. 21 note where he expressed concern over the possibility that wider-sweeping lockdowns will weigh down oil demand, with the coronavirus pandemic entering the unchartered territory of the winter months. "Winter months could prove to be one of the bitterest obstacles of them all," Innes said in the note.