Kuwait City, Asharq Al-Awsat—Global oil prices rose above 60 US dollars a barrel for the first time this year on Monday, on news of a sharp drop in US oil drilling activity and falling output from Libya, though they slipped slightly again during trading on Tuesday.
Global benchmark Brent crude rose to 62.57 dollars on Monday, its highest price since December 22, marking a steady four-week rise which has seen it gain around 35 percent in value—though at the end of Tuesday’s session it slipped to just under 61 dollars.
This comes as oil prices have dropped to their lowest levels in years, on the back of a heavily oversupplied market and tepid global demand. Prices have declined steadily from around 115 dollars in June of 2014 to 45.19 dollars last month, the lowest price in six years.
In addition to lower drilling activity in the US, the recent rebound in prices is believed by many observers to have been influenced by falling production from OPEC member Libya.
On Sunday Egypt announced it was launching coordinated airstrikes against Islamic State of Iraq and Syria (ISIS) targets in Libya following the abduction and murder of 21 Coptic Christian Egyptian workers in the country by the group, and the release of its video of their execution.
War-torn Libya has seen its production drop from 1.6 million barrels per day (bpd) before the ousting of Muammar Gaddafi in 2011 to 900,000 bpd in October of 2014. Current production levels stand at 350,000 bpd, according to official figures, though some estimates place this even lower, at 150,000 bpd.
Falling production from traditional OPEC heavyweights Libya and Iraq has also been accompanied by an excess in supply in the global oil market, mainly coming from the US, which recently became one of the world’s top oil producers as a result of a boom in shale oil production in the country.
Qatar’s Oil Minister Mohammed Al-Sada in December placed the oversupply in the market at around 2 million bpd, though Ali Al-Omair, his Kuwaiti counterpart, told reporters on the sidelines of an industry conference in Kuwait City on Monday he believed the excess in supply was “definitely lower than 1.8 million bpd.”
Speaking to Asharq Al-Awsat on Monday, Kuwaiti oil analyst Mohamed Al-Shatti put this figure even lower, at 1.2–1.3 million bpd, and also predicted that prices would not fall to the 45-dollar mark again in the near future.
“Oil prices now need to fall by about 10–15 dollars so they can reach the 45-dollar mark, and it is highly unlikely this will happen in a short space of time,” he said.
Sada also shared Shatti’s positive vision, telling Bloomberg on Monday there was now a “feeling of optimism” growing in the Gulf regarding an improvement in the oil market.
Kuwait’s Omair had a similarly upbeat outlook.
“All expectations had predicted oil prices would rise during the second half of 2015, but we are already seeing them rise in the first half,” he said at the Kuwait City conference, predicting a further rise in prices and global demand.
Other observers, however, had less than bullish outlooks for the market.
A recent report by global financial powerhouse Goldman Sachs said the drop in drilling activity in the US would not be enough to re-balance the market in the near future.
Data released by Baker Hughes on Friday showed that US drillers took 84 rigs offline last week, bringing the total number down to 1,056, a three-year low. But separate data released last week by the Energy Information Administration showed that despite the recent drop in drilling activity, the US still produced 9.2 million bpd of oil in early February, its highest production levels since weekly records began.