Oil prices remained largely unchanged on Thursday, with the market reacting to a smaller-than-expected decline in U.S. crude inventories and ongoing concerns about demand from China, balanced by disruptions in oil supply from Libya.
As of 0043 GMT, Brent crude futures saw a minor decrease, slipping by 1 cent to $78.64 per barrel. Meanwhile, U.S. West Texas Intermediate (WTI) crude futures experienced a slight rise, edging up by 8 cents to $74.60 per barrel.
Both benchmarks had dropped by over 1% on Wednesday, following data that showed U.S. crude inventories had decreased by 846,000 barrels to 425.2 million barrels last week. This draw was significantly below analysts’ expectations, who had forecasted a reduction of 2.3 million barrels according to a Reuters poll.
Despite the underwhelming inventory data, concerns over supply disruptions in Libya helped limit further losses. Several Libyan oil fields have ceased production due to a power struggle over control of the country’s central bank, with some estimates suggesting that these disruptions could reduce output by 900,000 to 1 million barrels per day (bpd) over the coming weeks. In July, Libya’s oil production was around 1.18 million bpd.
ANZ Research commented, “Supply side issues continue to hang over the market. Libyan output has more than halved this week amid a political dispute. Output is at risk of falling further as more fields close.”
Adding to the support for oil prices was the expectation that the U.S. Federal Reserve might soon begin lowering interest rates. Federal Reserve Bank of Atlanta President Raphael Bostic indicated that with inflation decreasing more than expected and unemployment rising, the time might be right for rate cuts.
Lower interest rates generally reduce borrowing costs, potentially stimulating economic activity and increasing demand for oil.
