Oil rises above US$70 on Libya turmoil

Military action and sanctions push prices to a 2019 high, but Morningstar analysts argue that supply and demand looks well-balanced

Morningstar Canada 10 April, 2019 | 2:00PM

Earlier this week, oil prices rose to their highest level this year, backed by supply shortages stemming from a military conflict in oil-producer Libya, as well as from U.S. sanctions on Venezuela and Iran. Brent crude, the main international contract, rose to above US$71 per barrel, while Western Canadian Select, the main Canadian contract, was up to over $56 per barrel. Both contracts are up over 40% since the start of the year.

“What’s interesting about the Libya conflict spurring an increase in prices is that it emphasizes how tight the oil market is,” says Nicolas Piquard, vice president and portfolio manager at Horizons Investment Management. “This makes me bullish, and I believe that it is unlikely that prices will move significantly lower from here,” he says.

Morningstar analysts believe that in 2019, supply and demand for crude look well-balanced. But that's only because OPEC volumes are expected to come in 1.4 million barrels of oil per day lower in 2019, allowing for U.S. firms to grow by 20%. Most of the 1.4 million barrels of oil per day curtailment is due to unavoidable losses in Iran and Venezuela.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Enbridge Inc40.20 CAD1.52
TC Energy Corp59.71 CAD1.81

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