Oil settles up over 1% on worries over supplies from Libya, Iraq
3:20 pm Thursday, August 29th, 2024
By Shariq Khan
NEW YORK (Reuters) -Oil prices settled up by more than a dollar a barrel on Thursday as supply disruptions in Libya and plans to lower output in Iraq raised fears of tighter global supplies.
Brent crude futures gained $1.29, or 1.6%, to settle at $79.94 a barrel. U.S. West Texas Intermediate crude futures rose $1.39, or 1.9%, to $75.91 a barrel.
More than half of Libya’s oil production was offline on Thursday and exports were halted at several ports due to a standoff between rival political factions. About 700,000 barrels per day of oil output is offline in the country, according to Reuters calculations.
“Libyan exports were holding up so far, but with the closure of the export terminal, that should translate in a tighter Atlantic basin,” said Giovanni Staunovo, an analyst at UBS.
Even after blockades are lifted, traders must adapt to Libya being a wild card for the markets, said Aline Carnizelo, managing partner at Frontier Commodities.
Offline production in Libya is at an imminent risk of reaching 1 million bpd, Carnizelo said, adding that a gradual recovery is unlikely before October.
Elsewhere, Iraq plans to reduce oil output in September as part of a plan to compensate for producing over the quota agreed with the Organization of the Petroleum Exporting Countries and its allies, a source with direct knowledge of the matter told Reuters on Thursday.
Iraq, which produced 4.25 million bpd in July, will cut output to between 3.85 million and 3.9 million bpd next month, the source said. Its agreed quota is 4 million bpd.
“At the moment, the market is tight and vulnerable to upside moves,” Carnizelo said.
Expectations for the U.S. central bank to start cutting interest rates next month also supported oil prices. Atlanta Federal Reserve President Raphael Bostic said it may be time for cuts, with inflation down farther and unemployment up more than anticipated.
The disruptions, and expectations of lower interest rates in the U.S., turned the attention away from signs of weak demand.
On Wednesday, oil prices lost more than 1% after data showed U.S. crude inventories last week fell by 846,000 barrels to 425.2 million, smaller than the draw of 2.3 million barrels forecast by analysts in a Reuters poll. [EIA/S]
Total oil products inventories in Europe’s Amsterdam-Rotterdam-Antwerp (ARA) refining hub rose 1.1% in the week to Thursday, data from Dutch consultancy Insights Global showed.
(Reporting by Shariq Khan; Additional reporting by Arunima Kumar, Ahmad Ghaddar, Katya Golubkova and Trixie Yap; Editing by Jason Neely, Mark Potter, Paul Simao, Diane Craft and David Gregorio)
