Oil Prices Steady Amid Middle East Supply Concerns and Weakened Demand
In the world of oil trading, the focus is on the delicate balance between supply concerns in the Middle East and signs of weakened demand. Oil prices were steady in early trading on Friday, with futures for October delivery remaining unchanged at 0033 GMT. The more actively traded contract for November fell slightly by 0.09% to $78.75, while U.S. West Texas Intermediate crude futures were down 0.14% to $75.80.
The recent surge in oil prices was primarily driven by supply disruptions in key oil-producing countries. More than half of Libya's oil production, equivalent to about 700,000 barrels per day (bpd), was offline on Thursday due to a standoff between rival political factions, leading to halted exports at several ports. Consulting firm Rapidan Energy Group predicts that Libyan production losses could range between 900,000 and 1 million bpd and could last for several weeks.
Additionally, Iraqi oil supplies are expected to shrink as the country's output has exceeded its OPEC+ quota. Iraq plans to reduce its oil output to between 3.85 million and 3.9 million bpd next month, further adding to concerns about global oil supply.
Despite the current supply disruptions, oil prices are still on track for a second month of decline. This dip was exacerbated by data showing a smaller-than-expected stock draw, with inventories slipping by 846,000 barrels to 425.2 million, compared to the 2.3 million barrel draw forecasted by analysts in a Multibagger poll.
Looking ahead, ANZ analysts express concerns about the medium-term outlook for oil balances in 2025, stating that OPEC may need to delay the phase-out of voluntary production cuts to support higher prices. OPEC and its allies, collectively known as OPEC+, are set to gradually phase out voluntary production cuts of 2.2 million barrels per day over the course of a year from October 2024 to September 2025.
In conclusion, the current dynamics in the oil market suggest a delicate balance between supply disruptions and weakened demand, which could impact global oil prices in the coming months. Investors and consumers alike should pay attention to these developments as they could have a significant impact on their finances and the broader economy.