Oil Prices Shrink despite Decline in Libyan Output
On the back of sustained demand and supply imbalance, the prices of crude oil prices fell in the global commodities market even with slowdown in Libyan output.
On the upside, the market expects demand in the United States (U.S) to increase following reports that the country’s crude inventories slumped. The demand outlook in US compensates for lower expectation from the Chinese.
China’s oil demand outlook has remained unimpressive due to weak production and refining activities that has persisted. The shade of fluctuation in demand and supply has however made oil market very volatile.
ICE Brent settled a little more than 1.1% lower on the day, taking it back below US$79 per barrel. US benchmark West Texas Intermediate (WTI) rose by 0.1% to $75.61 per barrel, after closing at $75.53 in the prior session.
Libyan output has dropped this week by close to 500,000 b/d, and this is not taking into account the shutting down of the Sharara oilfield earlier this month, ING said in a Thursday note.
Analysts noted that a prolonged shutdown from Libya will give OPEC+ a bit more comfort in increasing supply in 4Q-2024 as currently planned.
It is also noted that a short-lived disruption makes the OPEC+ decision on supply increases a lot more difficult. “Under this scenario, we believe they will be reluctant to bring additional supply to the market when there are still lingering demand concerns”, ING commodities strategists Warren Patterson and Ewa Manthey said in a note today.
According to Energy information Administration (EIA) report released yesterday, US commercial crude oil inventories fell by 846,000 barrels over the week, less than the 3.4m barrel decline the American Petroleum Institute (API) reported the previous day.
However, US commercial crude oil stocks have fallen eight out of the last nine weeks, which leaves inventories at their lowest level since January, according to data.
In addition, crude oil stocks in Cushing fell by 668k barrels week on week to 27.54 million barrels – the lowest level since November last year.
Gasoline inventories also declined, falling by 2.2 million barrels, while distillate stocks increased by a marginal 275,000 barrels.
US gasoline stocks dipped despite refiners increasing utilisation rates by 1pp over the week. Stronger demand would have driven the stock decline with implied gasoline demand increasing 114,000 b/d week on week.
ING said over the course of the next month, refinery run rates will fall as US moves into the autumn maintenance season. This should provide some support to product markets.
European gas prices edged slightly lower yesterday. However, TTF remains above EUR38/MWh, which is fairly elevated when you consider that storage is now 92% full. #Oil Prices Shrink despite Decline in Libyan Output
