Crude Shifts Lower on Tuesday

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Heading into the final trading day of the second quarter, West Texas Intermediate crude futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange shifted lower, under pressure from the potential return of Libya's output after warring parties reportedly made progress on lifting a six-month long blockade on the country's oilfields that cut off 1.2 million barrels per day (bpd) from the global market.

In early trading, the U.S. benchmark WTI shed $0.54 to near $39. 17 per barrel (bbl) and Brent crude futures for August delivery slipped $0.51 to trade just above $41 bbl ahead of the contract's expiration Tuesday afternoon. Next-month delivery Brent September futures traded near $41.44 bbl. NYMEX ULSD July contract were up 0.27 cents at $1.1680 a gallon, with next-month delivery August futures trading with 0.88 cents premium to expiring contract. NYMEX RBOB July futures jumped 1.12 cents to near $1.1953 gallon and next-month delivery August contract traded near $1.1952 cents.

Libya's National Oil Corp. said Tuesday it's in talks with forces loyal to opposition leader General Haftar Khalifa to restart production from the southern oilfields of El Sharara and El Feel. Both fields were shut down at the beginning of the year, bringing the country's production to less than a tenth of levels before January at 1.2 million bpd. According to NOC statements, the possible deal might include an agreement on distributing oil revenues and guarantees on field security with all invested parties expressing interest in continued talks.

"The corporation also intends the agreement will include solutions to protect the oil facilities and make sure they are never used as a military target or a political bargaining chip again," the NOC spokesperson said.

Libya's crude production is currently as low as 70,000 to 80,000 bpd.

In financial markets, Federal Reserve Chairman Jerome Powell and Secretary Treasury Steven Mnuchin will testify later today to the House Financial Services Committee on $3 trillion stimulus package for the U.S. economy. Markets will pay close attention to their comments on ongoing economic recovery as parts of the country began to lift quarantine restrictions, reopening businesses but also triggering what looks like a second wave of infections. Surges in new coronavirus cases has now been reported in 36 U.S. states, with at least 12 states pausing their reopening plans. Goldman Sacks analysts estimate renewed lockdowns would subtract nearly 5% from U.S. gross domestic product.

Those concerns are global. China announced Tuesday lockdown of 400,000 residents in North-Eastern province amid a surge of coronavirus there and Australia's state of Victoria reinstituted a four-week shutdown of all businesses as cases unexpectedly jumped in the most recent week. World Health Organization estimates COVID-19 cases have now topped 10 million and death toll surpassed 500,000 on Sunday, with sharp increases recorded in Brazil, India and Russia.

Global equities were mostly lower on Tuesday, with U.S. indexes also look to a modest fall at the start of the final trading day of the second quarter. Stocks on Wall Street set to book strongest quarterly gains since the global financial crisis, with Federal Reserve and Congressional stimulus lifting both the Dow and the S&P to double-digit percentage advance.

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

Liubov Georges