Oil Futures Retreat From 5-Month Highs

WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange nearest delivered oil futures and Brent on the Intercontinental Exchange edged lower on Monday after both West Texas Intermediate and Brent hit fresh five-month highs amid growing geopolitical turmoil in Libya and Venezuela, while surging production in the United States capped further gains.

In midmorning, Nymex WTI May futures moved $0.22 lower to $63.67 per barrel (bbl), pulling back from last week's $64.79 five-month spot high, while ICE Brent June contract was down $0.17 to $71.38. Nymex ULSD May futures shifted 0.77 cents lower to $2.0630 gallon, while Nymex RBOB May futures were down 1.91 cents to $2.0179, reversing off of last week's $2.0729 six-month spot high.

Libya's reignited civil war could wipe out crude production in the country according to the head of Libya National Oil Corporation. "Oil exports are facing their biggest threat since 2011 because of the size of forces currently involved and the aftermath of the war," said Mustafa Sanalla in a statement on Friday.

Opposition forces, led by General Khalifa Haftar already control the nation's largest military and more than 1 million bpd of crude oil production, according to Wall Street Journal. Haftar also has support of Russia, United Arab Emirates, and Saudi Arabia, with the kingdom pledging tens of millions dollars in support for the fight against U.N.-backed government in Tripoli. New questions emerged over viability of Libya's crude oil exports if Haftar unifies the country under his leadership in the coming months.

Adding to the impact of geopolitical risk in Libya, oil production in Venezuela collapsed by 270,000 barrels per day (bpd) in March to a long-term low of 870,000 bpd, according to International Energy Agency data released last week.

Against this supply shortfall, U.S. oil production has surged to a record 12.2 million bpd last week, surpassing Saudi Arabia and Russia as a top crude oil producer, according to Energy Information Administration. Baker Hughes reported on Friday the number of oil rigs deployed in the United States increased to a four-week high, while up 18 rigs against a year ago, pointing to strong growth in domestic drilling activity.

The latest developments in North America have reportedly unsettled producers in Russia that have longed voiced their concern about losing their market share due to country's participation in OPEC agreement. Russia's Finance Minister Anton Siluanov said on Saturday Russia and OPEC may decide to boost production to fight for market share with the United States, but this could press oil prices to as low as $40 bbl. Under OPEC accord, Russia agreed to shoulder more than 50% of the total non-OPEC cuts, but it has since struggled to reach its production cut quota.

Liubov Georges can be reached at liubov.georges@dtn.com