Oil steadies after three-day rally

August 27, 2024 (MLN): Oil prices steadied after a three-day rally, as concerns over a potential disruption in Libyan supply were balanced by an uncertain demand outlook.

Brent crude traded near $80.83 per barrel. While West Texas Intermediate crude (WTI) was at $76.72 per barrel.

Libya’s eastern government declared force majeure — a legal clause allowing missed shipments — on all oil fields, terminals and facilities as it struggles with its Tripoli-based rival for control of the OPEC member’s central bank and oil riches, Bloomberg reported.

The 70,000 barrel a day El-Feel oil field was shut down.

“Libya is once again at risk of losing all eastern oil exports,” RBC Capital Markets LLC analysts including Helima Croft said in a note. “The duration of the latest Libyan oil disruption will likely hinge on the success of the diplomatic effort to resolve this latest standoff.”

The impact of disruption in Libya helped to shift an oil market that had been turning steadily more bearish in recent weeks.

Still, Goldman Sachs Group Inc. cut its forecasts as global supplies increase, with the OPEC+ alliance due to begin adding barrels to the market next quarter. There’s also a weak demand outlook, especially in China, the world’s No. 1 importer.

“We still assume that OPEC will raise production in Q4 as the market is potentially shifting from an equilibrium where OPEC supports spot balances and reduces volatility to a more long-run equilibrium focused on strategically disciplining non-OPEC supply and supporting cohesion,” Goldman analysts including Daan Struyven said.

The threat to exports from Libya followed an exchange of fire between Israel and Iran-backed Hezbollah over the weekend that rekindled fears that the conflict would affect physical exports from the Middle East.

While both parties said that they had concluded military operations for now, the market is still watching for signs of further fallout from the war in Gaza.

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