Oil prices found stability on Thursday after two consecutive days of losses as concerns over supply disruptions in Libya countered weaker-than-expected U.S. crude inventory draws.
Brent crude oil, against which Nigerian oil is priced, edged up by 3 cents to settle at $78.68 per barrel, while U.S. West Texas Intermediate (WTI) crude oil gained 15 cents to close at $74.67 per barrel.
Both benchmarks had slipped over 1% during the previous trading session following U.S. data showing a smaller-than-anticipated draw in oil inventories, heightening fears of reduced demand.
The U.S. Energy Information Administration (EIA) reported a crude stockpile decrease of 846,000 barrels last week, significantly lower than the 2.3 million-barrel drop projected by analysts.
This underwhelming draw reignited concerns about sluggish demand in the world’s largest oil-consuming economy, particularly as inflation and interest rate uncertainty continue to weigh on global markets.
However, supply concerns stemming from Libya, a key member of the Organization of the Petroleum Exporting Countries (OPEC), helped put a floor under prices.
A power struggle over control of Libya’s central bank has forced several oilfields to halt production, potentially disrupting output by as much as 1 million barrels per day (bpd) for several weeks.
This production level represents a significant portion of the country’s typical July output of approximately 1.18 million bpd, raising the prospect of tighter global supplies.
“The ongoing disruption in Libya’s oil production is likely to keep prices supported,” said Priyanka Sachdeva, a senior market analyst at Phillip Nova. “The geopolitical risks and uncertainty surrounding Libya’s oilfields are providing a safety net for prices, preventing them from falling further.”
Analysts from ING noted that a prolonged shutdown in Libya could impact OPEC+’s decision-making on production levels in the coming months, offering the group a cushion to maintain output cuts or even increase supply in the final quarter of 2024, as previously scheduled.
The market’s divided outlook on Libya’s supply challenges has left traders uncertain about the potential impact on OPEC+ policy.
“The disruptions in Libya might affect the cartel’s planned output increase for the fourth quarter, depending on how long the supply issues persist,” said Ashley Kelty, an analyst at Panmure Liberum.
Adding to the complex picture, expectations for the U.S. Federal Reserve to begin cutting interest rates next month have provided some additional support to oil prices.
Raphael Bostic, President of the Federal Reserve Bank of Atlanta, hinted that the Fed might start easing monetary policy as inflation cools and unemployment rises more than anticipated, potentially lifting demand in the medium term.
While traders remain cautious, the interplay between Libya’s supply crisis and the uncertain demand outlook in the U.S. is likely to continue influencing oil markets in the weeks ahead.
For now, prices are expected to remain volatile as global economic concerns and geopolitical risks collide, keeping investors on high alert.
The oil market, already jittery from global recession fears, continues to react to shifting dynamics across key producing nations and economic powerhouses.
With traders watching every development closely, the coming weeks may see more price fluctuations as OPEC+, Libya, and U.S. demand factors further shape the narrative.
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