x Abu Dhabi, UAESunday 23 July 2017

Middle East crude production to be hit by maintenance and industrial action

Libya's production is set to drop further as workers at the country's Arabian Gulf Oil Company (AGOCO) protest over management changes and the company's structure.

Crude supply from some of the Middle East and North Africa's oil producers is expected to be lower as output is disrupted by maintanance work and industrial action.

Libya's production is set to drop further as workers at the country's Arabian Gulf Oil Company (AGOCO) protest over management changes and the company's structure.

"Union members met today in the fields of Mesla, Nafoora, Sarir and Hamada, and they decided to cut production in these fields at a rate of 10,000 barrels per day (bpd) until (the government) responds to their demands," Saad Denar, vice president of the federation of oil workers, told Reuters.

The union wants the firm to keep its current chairman and to separate AGOCO from the state-controlled National Oil Corporation (NOC).

The NOC subsidiary can produce up to 425,000 bpd, with the crude exported via Marsa el Hariga port. It is also used to feed the 220,000 bpd Ras Lanuf refinery, although workers at the country's largest refinery are already on strike.

Other key oilfields, producing light sweet Es Sider, Amna and Sirtica, were shut on Tuesday due to full storage tanks.

Also contributing to lower supply is Iraq where exports are set to fall sharply in September as major work is carried out at its vital southern export terminals.

In Yemen, the government said on Wednesday that it has foiled a plot by al Qaeda to seize two major oil and gas export terminals and a provincial capital in the east of the country.

The decrease in Libya would be another blow to government efforts to return exports to normal following the closure of the major Es Sider and Ras Lanuf oil terminals due to strikes at the end of July.

The recent export disruption is among the worst in the last year, with shipments down to about 425,000 bpd from earlier levels of more than 1 million bpd.

Brent crude edged towards $108 a barrel today, ending a four-day decline on better economic data coming out of the world's second largest economy.

"China's economic growth remains steady but modest," Barclays analyst Cheng Sijin said in a note, adding that high commodity imports in July may lead to a build-up in stocks that could temper Chinese appetite in coming months.

In the United States, crude inventories declined by 1.32 million barrels last week, the Energy Information Administration said on Wednesday, largely in line with the 1.2-million-barrel reduction analysts had forecast.

The EIA had also reported a small rise in gasoline stocks against expectations of a decline.

"The EIA inventory report was supportive for WTI spreads and market neutral for refined products," analysts at CIBC World Markets Inc wrote in a note, pointing to a 2.25 million barrel cushing drawdown that left inventories at the WTI contract delivery point at the lowest level since March 2012.

* Agencies