Oil prices edge lower from last week’s gains

Oil prices dipped on Monday, coming off from the five-month highs in earlier sessions last week caused by Libya’s ongoing strife.

Brent crude oil futures were at US$71.40 at 7.15am Greenwich mean time, down 15 US cents or 0.21%, from the last close. Last week Brent reached five-month high prices at a high of US$71.87 a barrel.

United States (US) West Texas Intermediate (WTI) crude futures were at US$63.55, down 21 US cents or 0.33% lower. WTI prices rose to hit US$67.70 levels last week.

Oil prices soared higher last week on expectation of tightened global supplies due to the fighting in North African Libya, as well as the ongoing supply cuts from the Organization of the Petroleum Exporting Countries (Opec) and sanctions from the US against Iran and Venezuela.

The fighting in Libya could cause crude production in the country to be wiped out, the head of Libya’s National Oil Corp cautioned, news outlets reported on Friday.

Read more on Oil prices soar higher as Libyan unrest threatens output.

Brent has gained 30% this year, while WTI has risen almost 40%, supported by rising global demand, production cuts from Opec and the US sanctions on Iran and Venezuela.

In June, the Opec and its allies will meet to decide if they wish to continue to withhold supply. The Opec has pledged to withhold around 1.2 million barrels per day of oil supply since the start of this year.

It is said that Opec’s leader Saudi Arabia is keen to continue on the output cuts, but the disruptions to oil elsewhere may cause the group to raise their supply.

High oil prices hurting demand: IEA

Not all stakeholders are pleased with the higher oil prices, and some are saying that it would threaten to soften the demand for oil.

The world’s biggest oil consumers – China, US, and India – are feeling the pinch on the high prices of oil, and the recent ramp-up in oil prices is weighing on demand, suggests the International Energy Agency’s (IEA) executive director Fatih Birol in an interview with S&P Global Platts.

‘The higher oil price environment may, if they stay around this level, also have an impact...put some downward pressure under demand growth,’ Mr Birol said.

On top of those concerns, geopolitical uncertainties in countries such as Venezuela, Iran, Libya and Algeria are concurrently making him "nervous," Mr Birol added.

‘Some developments in these countries [have] implications [for] oil markets and this may well push prices up if such developments occurred,’ Mr Birol said.

In its latest monthly oil market report released last week, the IEA kept its estimates for global oil demand growth in 2019 unchanged at 1.4 million barrels per day, up from 1.3 million barrels per day in 2018.

Read more on Oil prices rise to a five-month high.