Oil Prices Increase as Libya Oil Field Halts Production
Oil prices increased in the global commodity market early on Wednesday as Libya’s largest oil field halted production, raising supply concerns. The supply side continues to face threats from escalating geopolitical tension. This comes in addition to U.S. recession fears after the OPEC+ maintained the status quo on production policy at its just concluded joint ministerial meeting.
ICE Brent slumped by 0.13% to $76.58 per barrel from the closing price of $76.48 per barrel in the previous trading session. The American benchmark West Texas Intermediate (WTI) traded at $73.34 per barrel at the same time, a 0.19% rise from the previous session that closed at $73.2 per barrel.
Both benchmarks increased on Wednesday due to concerns that the possibility of rising tensions in the Middle East, home to a vast majority of global oil, could spread to other regions and damage oil supply routes.
Moreover, conflicts in the Red Sea, one of the world’s most frequently used sea routes for oil and fuel shipments, continue to influence upward price movements.
The US Central Command (CENTCOM) said in a statement on Tuesday that it destroyed one Iranian-backed Houthi uncrewed aerial vehicle and two Iranian-backed Houthi anti-ship ballistic missiles launched from Houthi-controlled areas of Yemen over the Red Sea in the past 24 hours.
In solidarity with the Gaza Strip, Yemen’s Houthi group has been targeting cargo ships in the Red Sea and Gulf of Aden that are owned or operated by Israeli companies or transporting goods to and from Israel.
The halt in production at Libya’s largest oil field has also intensified supply concerns in the market. The Sharara Oilfield in southern Libya, which accounted for about a third of the country’s production with a daily capacity of approximately 300,000 barrels, has been particularly affected.
Furthermore, in its Short-Term Energy Outlook (STEO) released on Tuesday, the EIA estimated that global oil inventories decreased by 400,00 barrels per day (bpd) in the first half of 2024 and will fall by 800,000 bpd in the second half of the year.
However, market players’ demand fears fueled by the heightened recession concerns in the US, the world’s largest oil consumer, limited further price rises.
Meanwhile, the American Petroleum Institute (API) reported a 180,000 barrel increase in US crude oil inventories late Tuesday. The data indicated that demand was cooling as the end of the summer travel season approached.
The data indicated that demand was cooling as the end of the summer travel season approached. Official figures from the EIA are expected to be released later in the day. If a rise in crude oil inventories is confirmed, prices are likely to climb further.
Oil prices moved lower yesterday. Brent crude traded to an intraday low of US$75, although it recovered from these lows, settling just 0.66% lower on the day. The market has continued to see a recovery in early morning trading today.
Oil has been unable to escape the broader risk-off move seen across assets, as concerns grow over the potential for a US recession following some weaker macro data in recent weeks.
This only adds to worries over Chinese demand. Investors have been exiting commodities in recent weeks, highlighted in positioning data and this has continued in recent days.
ICE data shows that aggregated open interest in ICE Brent has fallen by more than 8% since mid-June. This souring in speculative appetite comes despite oil fundamentals still looking supportive. #Oil Prices Increase as Libya Oil Field Halts Production Liquidity: Banks Drive Yield Surge with T-Bills Selloffs
