Oil Prices Crash As Libya Resumes Production

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"While China could secure the crude from alternative sources, such as West Africa which has a similar quality to US crude, the USA would find it hard to find an alternative market that is as big as China", Suresh Sivanandam, senior manager, Asia refining, at Wood Mackenzie, said last month, commenting on the impact of possible Chinese tariffs on USA oil imports.

Turning to recent developments, Libya's National Oil Corporation (NOC) has lifted a force majeure on four major oil ports. This potentially adds to disruptions in other oil producers amid tensions in the Middle East.

Sources at South Korean refining companies and a Chinese trading firm indicated that light sweet and medium sour U.S. crude suppliers may have to step up efforts to remain competitive in the Asian market, especially due to China's continued threats to levy a 25% tariff on American energy products. Firstly, if the new list of tariffs on China are eventually imposed then China could turnaround and tax USA oil. "If the world economy performs better than expected, leading to higher growth in crude demand, OPEC will continue to have sufficient supply to support oil-market stability", OPEC said in its report.

At DailyFX, we typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests the United States crude oil price may continue to fall.

Money managers raised their bullish bets on US crude in the week to July 3, the US Commodity Futures Trading Commission said on Monday.

USA crude futures rose 26 cents to settle at $74.11, after hitting a high of $74.70. Trader reaction to this zone will tell us if the buying or selling is greater at current price levels. On similar lines, the oil for delivery in July was trading higher by Rs 63, or 1.25 per cent, at Rs 5,112 per barrel in 7,576 lots.

"That basically took the wind out of the sails from the market", said Phil Flynn, analyst at Price Futures Group in Chicago.

Although the North American pricing benchmark WTI's discount against Dubai and Brent crudes narrowed sharply in recent weeks, Asian refiners may continue to favor USA crude, if the suppliers continue to offer attractive prices on a CFR basis. The global benchmark traded at a premium of $5.55 to WTI for the same month.

Brent crude futures hit a session high of 79.51 dollars.

"You've got USA competition coming left, right, center and landing cheaper".

One Chinese buyer is said to have already suspended imports of US oil, turning to Iran as one of its alternative sources of crude.

In Canada, an outage at the 360,000-barrel per day (bpd) Syncrude oil sands facility reduced flows into Cushing, Oklahoma, the delivery point for USA futures.

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