Oil prices rose on Thursday after two sessions of losses as Libya supply concerns came back into focus, with a smaller-than-expected drop in U.S. crude inventories undermining demand expectations.
Brent crude futures rose 15 cents, or 0.19%, to $78.80 a barrel by 0605 GMT, while WTI crude futures rose 27 cents, or 0.36%, to $74.79.
Both contracts fell more than 1% on Wednesday, with data showing U.S. crude inventories fell 846,000 barrels last week to 425.2 million, unmeeting analysts’ expectations for a 2.3 million decline.
According to some analysts, concerns about supply cuts from Libya, a member of the Organization of the Petroleum Exporting Countries (OPEC), are a positive for the market.
Libyan supply problems amid rising geopolitical concerns will keep oil markets on edge and will likely limit the price decline.
Some oil fields in Libya have shut down production amid a battle for control of the central bank, and one consultancy firm is forecasting production cuts of between 900,000 and 1 million barrels per day (bpd) for several weeks.
Libya’s July production was around 1.18 million bpd.
The length of the supply cut could have a spillover effect on OPEC+’s production plans in October, which could positively impact oil markets if supply does not ease as expected.
A prolonged shutdown from Libya would give OPEC+ some more leeway to increase supply in Q4 as currently planned, while a shortcut would make the cartel’s decision more difficult. In this scenario, they are believed to be reluctant to bring additional supply into the market while demand concerns are still there.
Oil prices were also supported by expectations that the US central bank will start cutting interest rates next month.
With inflation falling further and unemployment rising more than expected, it is believed that the time for interest cuts may have come.
Lower interest rates could stimulate economic activity and increase demand for oil as they make borrowing cheaper.
