Crude oil prices continue higher as supply in Libya is largely offline and the threat by ISIS continues to grow. The beheading of Christians in Libya shows the threat from ISIS is expanding and should cause concern. Egypt is bombing ISIS targets in Libya where infighting and sabotage has reduced Libyan output to 150,000 barrel a day trickle. That is down from a high of almost 1.5 million barrels per day.
In the meantime, hedge funds are caught on the wrong side increasing the odds for more short covering as more energy companies cut cap x and jobs. Risk premium in oil may start to come back and the glut of oil may tighten faster than many people think.
Not to mention that rigs targeting oil in the U.S. dropped to the lowest level in 5 years in a historic pullback in rig counts unlike anything seen before. The rig count fell by 84 to 1,056 last week, the lowest since August 2011, Baker Hughes and while many fall all over their selves to remind us that oil production will still rise they fail to mention that it will also start to plateau.
Bad weather in Iraq is also hampering supply. One estimate says that weather delays could reduce shipments from Iraqi ports by 1 million barrels a day this month, according to Petromatrix GmbH as reported by Bloomberg News.