LONDON (Reuters) - Oil slipped below $55 a barrel on Friday as a stronger U.S. dollar weighed on commodities and as higher Libyan output threatened to counter some of the supply cuts planned by OPEC and other producers.

Crude is still trading around its highest since mid-2015, supported by a deal by the Organization of the Petroleum Exporting Countries and non-members to lower output by almost 1.8 million barrels per day from Jan. 1.

Brent crude <LCOc1> was down 34 cents at $54.71 a barrel as of 1057 GMT, after rising 1.1 percent on Thursday. It reached $57.89, the highest since July 2015, on Dec. 12. U.S. crude <CLc1> fell 37 cents to $52.58.

"There's some profit-taking after the last session's gains. Oil prices are also weaker due to the stronger dollar," said Jonathan Barratt, chief investment officer at Ayers Alliance in Sydney.

Also weighing on oil was a surprise increase in U.S. crude stocks reported on Wednesday in the government's weekly supply report - and the prospect of sales beginning in January of crude from the U.S. Strategic Petroleum Reserve (SPR).

"Crude failed to maintain gains this week following the unexpected build in U.S. crude stockpiles, which revived the oversupply concerns," said Lukman Otunuga, a research analyst with FXTM.

"With some anxieties still lingering over the compliance side of the unexpected cut agreement, oil could end up extremely volatile with losses expected if production fails to decline."

While major OPEC producers including Saudi Arabia and Iraq have told customers that supply will be cut in line with the OPEC deal, Libya and Nigeria are exempt because conflict has already curbed their output.

Libya's National Oil Corp hopes to add 270,000 bpd to national production over the next three months after announcing on Tuesday the reopening of pipelines leading from two major fields, Sharara and El Feel.

Nonetheless, efforts to restore Libyan output since the North African country's 2011 uprising have been repeatedly stymied and political splits still present a risk to the plan.

The volume of extra oil reaching the market from the SPR could be sizeable. Consultancy Poten & Partners said on Thursday the reserve could be drawn down by some 190 million barrels between 2017 and 2025 if all planned sales went ahead.

The dollar index <.DXY> steadied on Friday not far below a 14-year peak of 103.65 reached earlier this week.

A firmer dollar makes dollar-denominated commodities including oil more expensive for holders of other currencies. </s> Singapore — Oil slipped below $55 a barrel on Friday as a stronger US dollar weighed on commodities and as higher Libyan output threatened to counter some of the supply cuts planned by the Organisation of the Petroleum Exporting Countries (Opec) and other producers.

Crude is still trading around its highest since mid-2015, supported by a deal by Opec and non-members to lower output by almost 1.8-million barrels per day from January 1.

Brent crude was down 32 cents at $54.73 a barrel in morning trade after rising 1.1% on Thursday. It reached $57.89, the highest since July 2015, on December 12. US crude fell 37 cents to $52.58.

"There is some profit-taking after the last session’s gains. Oil prices are also weaker due to the stronger dollar," said Jonathan Barratt, chief investment officer at Ayers Alliance in Sydney.

While major Opec producers including Saudi Arabia and Iraq have told customers that supply will be cut in line with the Opec deal, Libya and Nigeria are exempt because conflict has already curbed their output.

Libya’s National Oil Corp hopes to add 270,000 bpd to national production in the next three months after announcing on Tuesday the reopening of pipelines leading from two major fields, Sharara and El Feel.

Nonetheless, efforts to restore Libyan output since the North African country’s 2011 uprising have been repeatedly stymied and political splits still present a risk that the plan may not go smoothly.

Also weighing on prices were an unexpected increase in US crude stocks reported on Wednesday in the government’s weekly supply report and the prospect of sales of crude from the US strategic petroleum reserve beginning in January.

New York-based tanker and energy consultancy Poten &Partners on Thursday said the strategic reserve could be drawn down by some 190-million barrels between 2017 and 2025 if all planned sales went ahead.

The dollar index steadied on Friday not far below a 14-year peak of 103.65 reached earlier this week.

A firmer dollar makes dollar-denominated commodities, including oil, more expensive for holders of other currencies. </s> U.S. crude oil inventories came in unexpectedly high at 485.4M barrels, while refineries operated at 91.5% capacity. Market watchers are also keeping tabs on Libya which is expected to boost production over the next several months.

Oil prices are also facing a headwind with the U.S. Dollar Index at a multi-year high.

WTI crude oil futures to $52.70/bbl at last check. Brent crude to $54.69/bbl. </s> There's been little Christmas cheer for oil today, with Brent crude has slipping below $55 a barrel after a stronger US dollar and higher estimated oil output from Libya weighed on the market.

The global benchmark has slipped 0.54 per cent to $54.74 a barrel, while US sweet crude is down 0.59 per cent to $52.64.

Libya's National Oil Corporation hopes to add 270,000 barrels per day (bpd) to national production over the next three months after announcing on Tuesday the reopening of pipelines leading from two major fields in the country, El Feel and Sharara.

Read more: Obama bans new drilling for oil and gas in Arctic Ocean

The dollar index steadied today, but remains not far below a 14-year peak of 103.65 reached earlier this week.

When the greenback rises, it makes dollar-denominated commodities such as oil more expensive for holders of other currencies.

An unexpected increase in US crude stocks reported on Wednesday in the Energy Information Agency's weekly supply report also sucked some Christmas cheer out of the market.

Read more: Hurricane Energy whips up a storm with "significant" North Sea oil find

Brent still trading at its highest levels since mid-2015 and has rallied around 20 per cent since November 29, the day before a major Opec deal was announced.

The Organisation of the Petroleum Exporting Countries (Opec) agreed on 30 November to slash production among its 13 members by 1.2m bpd from 1 January for six months.

A later agreement with 11 non-Opec oil producing nations, who agreed to cut production by 558,000 bpd between them over the same period of time, has brought the total production cut to 1.8m bpd.

Read more: BP scoops up stake in Abu Dhabi oilfields in a deal worth $2.2bn

Prices are forecast to enter the $60 a barrel territory in the first quarter of next year, when Opec's deals are due to come into effect (on the other hand, French group Engie SA has warned prices could dip as low as $10 a barrel within a decade). </s> The recent perception that the global crude market is tightening gained traction on Thursday, aided by reports that key producer Libya is on the brink of war - and this resulted in Brent topping the $70 threshold for the first time since November.

Brent briefly touched $70.03 on Thursday before settling 9 cents higher at $69.40 per barrel, while West Texas Intermediate crude settled 36 cents lower at $62.10 per barrel.

The gains for Brent came as general Khalifa Haftar, Libya's eastern military leader, ordered his forces to march on Tripoli, which kindled concerns that open war could soon break out between the country's main political factions.

Hamish Kinnear, senior analyst for the Middle East and North Africa at Verisk Maplecroft, predicted that if war breaks out, it could be long and ugly: of Hafter's Libyan National Army he said, "Our base case is that the LNA will soon find itself bogged down in heavy fighting near Tripoli; unlike its recent advance in the south, the LNA will face more determined resistance from larger and better organized militias in the western region."

Crude on Thursday was also supported by the growing notion that demand worries - which have kept a cap on prices for weeks now - may be somewhat unfounded: Michael McCarthy, chief market strategist at CMC Markets, said, "There's a much-better-than-expected demand picture after the recent China and U.S. PMI numbers, along with a potential kicker from any U.S.-China trade agreement," he said.

Larry Kudlow, economic advisor to U.S. president Donald Trump, said trade talks between the United States and China made "good headway" last week and the two sides aim to bridge differences during further talks; plus a private business survey of China's service sector showed that the Caixin/Markit services purchasing managers' index rose to 54.4, the highest since January 2018 and up from February's 51.1, a fourth-month low.

While the higher crude prices are a benefit to many countries (including the U.S., where it will presumably spur much-needed industry investment), Dan Deming, managing director of KKM Financial, told Bloomberg television that "we're reaching an area here where demand's probably going to be very significant moving forward and the increase in demand....Chinese markets are at 7 month highs and continuing to evolve....so I feel we're reaching a critical mass here" and that demand will push prices further forward. </s> FILE: Production loss from a December attack on a Libyan pipeline was estimated at between 70,000 barrels a day and 100,000 bpd. Photo: Reuters

BENGHAZI, Libya - A Libyan crude pipeline owned by the al-Waha oil company, feeding the port of Es Sider, was attacked on Saturday by a “terrorist group”, state company NOC said.

A fire broke out but it was too early to say whether production had been affected, the source said.

The pipeline was attacked in December, causing a loss of production estimated at between 70,000 barrels a day and 100,000 bpd.

The fire broke out 21km from North West Marada, NOC roughly the same area of the December attack.

The area is frequented by Islamic State fighters, Libyan officials have said.

NOC said its firefighters were at the site. </s> Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Crude oil trading range for the day is 3523-3665.Crude oil gained supported by strong U.S. economic data and optimism that crude producers would abide by an agreement to limit output.Libya's NOC confirmed that pipelines leading from Sharara and El Feel fields had reopened, and hoped to add 2.7 Mbpd production over next three months.Oil markets are expected to remain well-supplied despite the planned OPEC and non-OPEC reductions.BUY CRUDE OIL JAN @ 3570 SL 3530 TGT 3608-3640. MCX. </s> BENGHAZI, Libya, April 21 (Reuters) - A Libyan crude pipeline owned by the al-Waha oil company, feeding the port of Es Sider, was attacked on Saturday by a "terrorist group", a company source said.

A fire broke out but it was to early to say whether production had been affected, the source said. The pipeline was attacked in December. Production loss then was put at between 70,000 barrels a day and 100,000 bpd. (Reporting by Ulf Laessing; editing by Andrew Roche) </s> ALGIERS, Algeria – OPEC’s unexpected understanding to trim production shows the cartel still has the resolve – and even desperation – to try to guide energy markets higher. But don’t expect triple-digit oil prices anytime soon.

Ministers from the oil cartel reached a preliminary deal Wednesday in Algeria to cut production for the first time since the global financial crisis eight years ago. The size of the cut was modest – to between 32.5 million and 33 million barrels per day from just below current levels of around 33.2 million barrels per day.

Though limited, the decision came as something of a surprise – expectations were that once again the regional rivalry between Saudi Arabia and Iran would create a stalemate. Oil prices shot up by around 5 percent in the wake of the cut.

On Thursday, markets stabilized, with the benchmark New York rate 23 cents lower at $46.82 a barrel and the international standard, Brent, 34 cents lower at $48.87.

Any failure to enact the agreement could lead to a renewed drop. And that risk remains – the deal, after all, is not done yet.

Output levels for individual countries will have to be finalized at a meeting of the Organization of the Petroleum Exporting Countries in Vienna in November. OPEC agreed that Nigeria, Iran, and Libya would be exempted from making big cuts as their economies are already stymied by conflicts or sanctions.

The main concern ahead of the meeting centered on Iran, which has been resistant to cutting production, as it’s trying to restore its oil industry since emerging from international sanctions over its nuclear program earlier this year.

“We see this more as an act of desperation,” Commerzbank analyst Barbara Lambrecht said. “Saudi Arabia appears willing to bear the main brunt of the burden.”

Saudi Arabia, the world’s biggest producer, played a key role in the OPEC policies that helped push oil prices sharply lower over the past couple of years.

In the summer of 2014, oil prices were trading above $100 a barrel but increased output from non-OPEC countries, particularly the U.S., created an oversupply in the market. Instead of cutting production, OPEC opted to pump at high volumes to maintain market share and, seemingly, to drive U.S. shale oil and gas producers, who have higher operating costs, out of business.

Crude prices plunged, and in January of this year fell below $30 for the first time in more than a decade. The lower prices have hit many oil-producing countries hard, particularly poorer OPEC members Venezuela and Nigeria, but also non-OPEC states Russia and Brazil. It’s also taken a toll on Saudi Arabia – its public finances are not as strong as they were and the country’s credit rating has been downgraded.

Oversupply isn’t the only reason oil prices have remained under pressure. Weaker economic growth in energy-hungry China, for example, has had a big impact. Earlier this month, the International Energy Agency said growth in oil demand had slowed significantly during the third quarter.

OPEC’s hope now is that it will be able to get non-OPEC members, such as Russia, to get aboard its strategy to trim output.

“Good luck with that one!” quipped Michael Hewson, chief market analyst at CMC Markets. Moscow is still smarting from economic sanctions and the period of low prices, which have caused a painful recession and blown a hole in its state budget.

One potential impact of the understanding forged in Algiers is that any material increase in oil prices could encourage U.S. shale oil and gas producers back into the market, thereby offsetting any impact in prices – in the longer-term as it takes time to kick start production given financial constraints.

Once the OPEC deal is confirmed, Marino Valensise, Head of Multi Asset at Barings Asset Management, said oil prices will likely drift higher to between $55 and $60.

“At those levels, shale producers in the States will inevitably increase production and there will be no potential through that price level,” he said.
As new Libyan production comes on line, the world price of crude oil falls below $55 a barrel.