Crude oil prices ticked higher earlier today, after posting two daily losses, as the shutdown of oil fields in Libya took precedence over demand worry.
Oil production at several Libyan oilfields was halted on Tuesday after the rival government in the east announced on Monday a stop to all oil production and exports from OPEC's African producer.
Libya, which pumps about 1.2 million bpd of oil, was plunged into a deeper political crisis earlier this month over a row about the leadership of the Central Bank of Libya, the only internationally recognized depository of the country's oil revenues.
In response to the shutdowns, oil prices received some increasingly rare support, with market behavior highlighting the impact of a production outage on supply prospects even as demand for oil in China remains a top priority for traders.
Additional support for prices today came from continued expectations of an interest rate cut in the United States next month. The positive movement is unstable, however, and we may see a reversal later in the day under the weight of bearish factors.
On the bearish side, the U.S. Energy Information Administration reported only a modest draw in oil inventories yesterday, at less than 1 million barrels. Even though this was the second weekly draw in a row, it appeared to not have impressed the market much. Demand for oil remained a concern.
"Libyan output has dropped this week by close to 500k b/d, and this is not taking into account the shutting down of the Sharara oilfield earlier this month," ING commodity analysts Warren Patterson and Ewa Manthey said in a note. "A prolonged shutdown from Libya will give OPEC+ a bit more comfort in increasing supply in 4Q24 as currently planned."
The analysts noted that the Libyan outage will make OPEC+'s decision on whether to bring back some production more difficult and said they expected the cartel to resist that temptation and avoid a price rout.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
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