U.S. crude oil slips below $77 per barrel after surging on Libya production halt

U.S. crude oil futures slipped below $77 per barrel on Tuesday, after surging in the previous session on OPEC member Libya halting production and exports.

Libya produces about 1.2 million barrels per day with the overwhelming majority of its crude exported to the global market, with European nations serving as the main buyers. U.S. oil surged because it is the best substitute for importers looking to replace lost Libyan supply.

But the U.S. benchmark is pulling back slightly as the market expects a gradual disruption rather than all of Libya’s production suddenly going offline, Sara Vakhshouri, founder of SVB Energy International, told CNBC’s “Capital Connection” on Tuesday.

Here are Tuesday’s energy prices:

• West Texas Intermediate October contract: $76.99 per barrel, down 43 cents, or 0.56%. Year to date, U.S. crude oil has gained 7.4%.
• Brent October contract: $80.96 per barrel, down 47 cents, or 0.58%. Year to date, the global benchmark is ahead 5.1%.
• RBOB Gasoline September contract: $2.28 per gallon, little changed. Year to date, gasoline is ahead 8.5%.
• Natural Gas September contract: $1.93 per barrel, down more than 2 cents, or 1.38%. Year to date, gas is down 23.2%.

Goldman Sachs sees the disruptions in Libya as short lived with 600,000 bpd falling off the market in September and 200,000 bpd in October.

Libya is divided between rival governments in Tripoli and Benghazi. The Benghazi government announced the production halt Monday amid a dispute with the Tripoli government over who should lead the central bank.

“In the case of Libya, the eastern regional government can turn off Libyan production like a light switch,” Helima Croft, head of global commodity strategy at RBC Capital Markets, told CNBC’s “Squawk Box” Tuesday.

“Gen. Haftar, he’s a militia leader in the east. If he wants to shut it down, he controls all the terminals in the east, the infrastructure — so they can shut it down,” Croft said.

Goldman slashed its forecast for Brent prices by $5 to a range of $70 to $85 per barrel and expects the global benchmark to average $77 in 2025, down from $82 previously.

Demand in China has softened as the world’s second-largest economy switches from gasoline-powered cars to electric vehicles, Daan Struyven, head of oil research at Goldman, told clients in a Monday note. And supply out of the U.S. is beating expectations on efficiency gains, Struyven said.