Oil extends gains as major producers flag capacity limits

Shafaq News / Oil prices rallied for a third day on Tuesday as major producers Saudi Arabia and the United Arab Emirates looked unlikely to be able to boost output significantly while political unrest in Libya and Ecuador added to those supply concerns.

U.S. West Texas Intermediate (WTI) crude futures rose $1.13, or 1%, to $110.7 a barrel at 0332 GMT, extending a 1.8% gain in the previous session.

Brent crude futures advanced $1.26, or 1.1%, to $116.35 a barrel, adding to a 1.7% rise in the previous session.

The UAE and Saudi Arabia have been seen as the only two countries in the Organization of the Petroleum Exporting Countries (OPEC) with spare capacity available to make up for lost Russian supply and weak output from other member nations.

“A seam of tight supply news bolstered the market. Two major producers, Saudi Arabia and the UAE, are said to be at, or very close to, near‑term capacity limits,” Commonwealth Bank commodities analyst Tobin Gorey said in a note.

UAE Energy Minister Suhail al-Mazrouei said on Monday UAE was producing near maximum capacity based on its quota of 3.168 million barrels per day (bpd) under the agreement with OPEC and its allies, together called OPEC+.

His comments confirmed remarks by French President Emmanuel Macron who told U.S. President Joe Biden on the sidelines of the Group of Seven nations meeting that the UAE was producing at maximum capacity and that Saudi Arabia could increase output by only 150,000 bpd, well below its nameplate spare capacity of around 2 million bpd.

Analysts also warned political unrest in Ecuador and Libya could tighten supply further.

Libya’s National Oil Corp said on Monday it might have to declare force majeure in the Gulf of Sirte area within the next three days unless production and shipping resume at oil terminals there.

(Reuters)