Oil Closes Lower On Libya Oil Fields Starting Production
On Thursday, oil prices closed lower as Libya restarted production in certain fields. Gasoline stockpiles rose past expectations. U.S. crude stockpiles dropped in the previous week, keeping prices at bay. WTI crude oil closed lower by 1.3% to $48.98 a barrel, while Brent crude oil closed lower to $51.63 a barrel.
Production Restart
The biggest reason for oil prices falling was because of Libya restarting production in two key oil fields. The two oil fields in question are the Sharara and El Feel. Both of these fields are estimated to produce a combined 400,000 barrels a day. It doesn’t end there though.
That is because Libya is expecting to increase production to a higher level. Libya stated that it wants to eventually increase production to between 800,000 to 1.1 million barrels per day.
The reason why oil prices fell is because an increase in stockpiles is a huge negative for the oil market. With the oil fields being restarted, this means that all this added supply will be brought back into the global market. Considering that there is a global oil glut, it doesn’t bode well for prices.
Gasoline Stockpiles Increase
The problem is that gasoline stockpiles increased in the current released report. That is not good, because it spells trouble for oil prices. The Energy Information Administration — EIA — revealed that gasoline stockpiles rose by 3 million barrels per day. There are two problems with respect to this data.
For starters, there was an expectation that gasoline stockpiles would drop by 1 million barrels per day. The fact that the analysts’ estimate was not met is very disturbing. Secondly, stockpiles increasing instead of dropping was a huge negative.
How does an increase in gasoline stockpiles affect oil prices? That is because crude oil uses gasoline as a component. Therefore, refiners don’t want to buy any more gasoline as a result. That in turns causes crude stockpiles to build as well. With stockpiles building up on both ends, oil prices start to trade lower.
Crude Stockpiles Down
Oil prices on Thursday had a lot of problems to contend with. What may have kept prices from falling further would have been the positive U.S. crude stockpiles data. The EIA released data stating that U.S. crude stockpiles fell by 3.6 million barrels for the week ending April 21.
There are two positive items about this reported data. The first being that the newly released crude data beat expectations. The expectation was that the stockpiles would fall by 1.7 million barrels. Secondly, it is the third straight week of drawdowns in U.S. crude. Such drawdown is partly responsible for keeping oil prices elevated above the $40 a barrel level.
What Binary Options Traders Should Watch For
There are a few things that traders should watch for.
The first of which is is how the newly added barrels of oil from Libya will play into the global oil market. If production is eventually increased to a higher amount, there is a huge chance that oil prices will be pressured lower.
The second item would be gasoline stockpiles. If the demand for gasoline doesn’t improve, crude stockpiles are likely to build up as a result. It is imperative to see a shift in demand if oil prices are to eventually trade higher.
The final item that traders should keep an eye on would be U.S. crude stockpiles. If stockpiles start to rise even more, oil prices will suffer as a result. In addition, there has been three straight weeks of drawdowns. Another week of a drawdown, and that could temporarily boost prices.
more