WTI Extends Recovery Above $76.50 As Libya Production Halt Raises Supply Concerns -

WTI Extends Recovery Above $76.50 As Libya Production Halt Raises Supply Concerns

Aug 26, 2024Jeremy ParkinsonFinance0

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WTI trades in positive territory for the third consecutive day near $76.75 in Tuesday’s early Asian session.

Libya’s shutdown of production and exports fuelled fresh supply concerns, boosting the WTI price.

The sluggish Chinese economy and oil demand concerns might cap the black gold’s upside.

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $76.75 on Tuesday. The WTI price extends its recovery on the back of a production halt in Libya, adding to supply fears fuelled by reports of escalating conflict in the Middle East.

Libya’s eastern government in Benghazi said Monday that crude oil production and exports would shut down amid a dispute with the internationally recognized western government in Tripoli over who should lead the central bank, per Bloomberg.

Libya produces around 1.2 million barrels per day, with more than 1 million bpd exported to the global market, said Matt Smith, lead oil analyst for the Americas at Kpler. The developments surrounding Libya’s output cuts have triggered further supply concerns and boosted WTI prices.

“The biggest risk for the oil market is probably a further drop in Libyan oil production due to political tensions in the country, with a risk that production could fall from current levels of 1 million barrels per day to zero,” noted Giovanni Staunovo, UBS analyst.

Furthermore, firmer expectations that the US Federal Reserve (Fed) will cut interest rates in its upcoming September meeting lift the WTI price. On Monday, San Francisco Fed President Mary Daly said that she believes it’s appropriate for the Fed to begin cutting interest rates. Lower interest rates generally support the WTI price as it reduces the cost of borrowing, which can boost economic activity, and oil demand.

However, the upside for black gold might be limited. China’s oil imports in July were down 12% from June and 3% from July 2023, raising fears of the country’s economic health and future oil demand as China is the world’s largest importer of oil. More By This Author:EUR/JPY Attracts Some Sellers Below 161.00 As BoJ’s Ueda Hawkish Remarks Boost The Japanese Yen GBP/USD Extends Rally Above 1.3100, Focus On Boe’s Bailey And Fed’s Powell Speeches USD/CAD Trades With Mild Losses Near 1.3600, All Eyes On Fed Chair Powell’s Speech