By Adedapo Adesanya
Crude oil prices rose Thursday as supply disruptions in Libya and plans to lower output in Iraq raised fears of tighter global supplies, with Brent gaining $1.29 or 1.6 per cent to settle at $79.94 a barrel and US West Texas Intermediate (WTI) appreciating by $1.39 or 1.9 per cent to $75.91 a barrel.
Libya’s eastern government called force majeure on all oil production and exports, which could remove up to 1 million barrels per day of crude from the markets.
More than half of Libya’s oil production was offline on Thursday and exports were halted at several ports due to a standoff between rival political factions.
Libya’s National Oil Corporation, which controls the country’s oil resources, said yesterday that the average oil output stood at 591,024 barrels as of Wednesday, August 28, over 50 per cent of Libya’s output of 1.18 million barrels per day produced in July.
Market analysts noted that Libya’s development is much more significant to oil markets because it represents real barrels lost, effectively tightening the physical market for as long as the Libya crisis lasts.
The conflict over control of Libya’s central bank threatens a new bout of instability in the country, which is divided between eastern and western factions supported by Turkey and Russia.
Elsewhere, Iraq plans to reduce oil output in September as part of a plan to compensate for producing over the quota agreed with the Organisation of the Petroleum Exporting Countries (OPEC) and its allies.
Iraq, which produced 4.25 million barrels per day in July, will cut output to between 3.85 million and 3.9 million barrels per day next month. Its agreed quota is 4 million barrels per day.
Oil prices were also helped by expectations that the US Federal Reserve would begin reducing interest rates next month. President of the Atlanta Federal Reserve Raphael Bostic stated that as unemployment has increased more than expected and inflation has decreased further, it might be time for cuts.
The disruptions, and expectations of lower interest rates in the US, turned the attention away from signs of weak demand after data showed that US crude inventories last week fell by 846,000 barrels to 425.2 million, smaller than the expected draw.