Oil prices saw a modest recovery on Thursday after two consecutive days of decline, as concerns about supply disruptions in Libya resurfaced. Brent crude futures inched up by 3 cents to $78.68 a barrel, while U.S. West Texas Intermediate crude futures rose by 15 cents to $74.67. These gains followed a more than 1% drop on Wednesday, driven by a smaller-than-expected reduction in U.S. crude inventories, which fell by 846,000 barrels—far less than the 2.3 million barrels anticipated by analysts.
The renewed focus on Libya, an OPEC member, provided some support to oil prices. Analysts pointed to ongoing geopolitical tensions in Libya, which could keep oil markets on edge and prevent prices from falling significantly. A power struggle over control of the country’s central bank has led to the shutdown of several oilfields, with some estimates suggesting production disruptions of up to 1 million barrels per day for several weeks. In July, Libya’s output was around 1.18 million barrels per day.
The duration of Libya’s supply issues may influence OPEC+ decisions on production in the fourth quarter of 2024. ING analysts noted that a prolonged shutdown could give OPEC+ more confidence to increase supply as planned. However, some traders remain uncertain about whether these disruptions will impact OPEC+ production plans, given concerns about weak global demand and economic uncertainties.
Additionally, expectations that the U.S. Federal Reserve might begin cutting interest rates next month lent further support to oil prices. Raphael Bostic, President of the Federal Reserve Bank of Atlanta, indicated that with inflation decreasing and unemployment higher than expected, it could be time to consider rate cuts.
Oil prices showed signs of stabilisation as market participants weighed supply concerns from Libya against broader economic factors, including potential changes in U.S. interest rates.
Challenger Energy Group plc (LON:CEG) is a Caribbean and Atlantic margin focused oil and gas company, with a range of petroleum assets located onshore in Trinidad and Tobago, and Suriname, and offshore in the waters of The Bahamas and Uruguay.
