(Bloomberg) -- Oil extended gains after Libya declared force majeure at a key oilfield amid widening shutdowns that have wiped out close to a million barrels from daily global supplies.
Brent crude futures rose above $77 a barrel while West Texas Intermediate rose above $74 amid scant trading Monday because of a US holiday. Futures got a boost after the North African country declared force majeure at the El-Feel field. The legal clause, which allows Libya to halt crude exports, came just days after authorities in the east announced a complete halt of all output and exports.
Prices had been weighed upon by expectations that the Organization of Petroleum Exporting Countries and allies are due to add 180,000 barrels to daily supplies within weeks as they gradually restore production, according to delegates involved in the discussions.
OPEC+ has repeatedly said it could “pause or reverse” the planned output hikes if necessary, though a political crisis in Libya that halved the nation’s production may have given the alliance the space to add more barrels.
Over the weekend, Chinese data showed factory activity contracted for a fourth month in August and a residential slump deepened, raising concerns the world’s top crude importer may struggle to meet this year’s economic growth target.
Meanwhile, options are signaling the market is now anticipating a lower risk of futures spiking. The bias toward puts in WTI’s second-month options skew has deepened to the most bearish since late July, as traders continue to protect against price drops.
Oil has given up most of its gains this year in response to expectations of ample supply and signs of economic headwinds in the US and elsewhere. Volatility has ramped up in recent weeks, with crude futures facing some of the largest intraday swings in months.
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--With assistance from Yongchang Chin and Paul Burkhardt.
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