Oil Prices Fall as Demand Uncertainty Offsets Libya Supply Concerns
Although losses were limited by supply concerns in the Middle East and Libya, oil prices dropped by about 1% on Wednesday as a result of ongoing worries about Chinese demand and increased prospects of a wider economic downturn.
By 1320 GMT, Brent crude futures had dropped 76 cents, or 0.96%, to $78.79 per barrel. At $74.76, U.S. West Texas Intermediate crude futures dropped 77 cents, or 1.02%.
After rising 7% over the previous three days to over $81 and $77 a barrel for Brent and WTI, prices fell more than 2% on Tuesday.
According to Amarpreet Singh, an analyst at Barclays, “supply risks in Libya have come to the fore but market participants seem sanguine… demand in China remains weak and the expected second-half rebound has yet to show credible signs of commencing,” in a note.
The biggest dangers to oil markets still remain the probable loss of Libyan oil output and the potential escalation of the Israel-Gaza conflict to include Iranian-backed fighters from Hezbollah in Lebanon, even if U.S. oil and fuel inventories declined last week and boosted prices.
Due to an ongoing conflict between competing government factions over control of the central bank and oil revenue, production at several oilfields in Libya has stopped. Approximately 1.2 million barrels per day (bpd) of production are at danger due to the conflict.
The National Oil Corp (NOC), which is in charge of oil resources, and the government in Tripoli have yet to announce any closures.
Given that actual barrels are being evacuated, the interruptions in Libya ought to tighten the oil market. However, investors want to see a decline in Libyan crude shipments prior to this, according to UBS analyst Giovanni Staunovo.
With no indications of a significant development in the truce negotiations in Cairo, violence between Israel and Hamas terrorists persisted in the Gaza Strip in the Middle East.
Israel and Hezbollah fired rockets and missiles at one another over the Lebanese border throughout the course of the weekend.
{8849}The American Petroleum Institute reported data on Tuesday that showed a 3.407 million barrel decrease in U.S. crude oil stockpiles in the week ending August 23. These figures were cited by market sources. Distillates saw a decrease of 1.405 million barrels while gasoline stockpiles dropped by 1.863 million barrels.
The U.S. Energy Information Administration (EIA) is expected to release weekly data on U.S. oil storage later on Wednesday.
