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Crude oil futures rose on Thursday, rebounding from two days of declines, as supply disruptions in Libya and plans to cut production in Iraq raised concerns about tightening global supplies.
More than half of Libya’s oil production is out of service, Exports have been halted at several ports due to a standoff between rival political factions, Reuters reported.
While it is not clear how much Libya will cut in exports, some analysts say 500,000 to 900,000 barrels per day could be affected. “Crude oil prices remain bearish as internal disputes over control of the banking system remain a concern for traders,” said Dennis Kessler of Bank of Oak Financial, according to Dow Jones. “Technically, WTI October crude remains in a bearish structure with near-term support at the 73.82 area,” Kessler added.
Offline production in Libya is at the level of Imminent threat of reaching 1 million barrels per dayA gradual recovery is unlikely before October, and even after the blockade is lifted, traders will have to adjust to Libya being a wild card for markets, Aline Carnizzello of Frontier Commodities told Reuters.
Reuters also reported that Iraq intends to reduce oil production in September as part of a plan to compensate for production exceeding the quota agreed upon with OPEC+.
Iraq, which produced 4.25 million bpd in July, is said to cut its output to a range of 3.8-3.9 million bpd next month, while its agreed quota is 4 million bpd.
In addition, the US GDP in the second quarter was Revised up to 3% From 2.8% previously, which Mizuho’s Robert Yawger said “sparked a rally across multiple asset classes today,” crude appears to be “on the bandwagon of a rising tide that lifts all boats.”
Yaogar also pointed to the continued risk of escalation of the conflict between Israel and Hezbollah or Iran.
US Light Crude Oil (CL1:COM) for October delivery closed +1.8% To $75.91 per barrel, and Brent crude (CO1:COM) for October was stable +1.6% to $79.94 a barrel, with both benchmarks breaking a two-day slide.
October of this year also ended the New York natural gas contracts (NG1:COM). +1.9% To $2.137/MMBtu, after the Energy Information Administration reported a 35 billion cubic feet increase in underground storage last week, slightly less than expected.
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A prolonged shutdown in Libya would give OPEC+ more breathing room to increase supply in the fourth quarter as planned, but a short-term disruption would make the group’s decision Much harderING strategists said:
ING said OPEC+ would be reluctant to bring additional supply to the market if demand problems persist.
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