Oil prices stabilized on Thursday following a smaller-than-anticipated draw in U.S. inventories, raising worries about declining demand. However, the likelihood of ongoing supply disruptions in Libya helped to limit the extent of losses.
Crude markets were recovering from two consecutive days of declines, having largely undone a recent rebound due to ongoing fears that slowing growth in both the U.S. and China may negatively impact demand in the months ahead.
Traders were still pricing in some risk associated with production disruptions in Libya, alongside indications of persistent conflict in the Middle East.
Brent oil futures for October delivery dipped slightly to $78.62 a barrel, while West Texas Intermediate crude futures held steady at $74.57 a barrel as of 20:54 ET (00:54 GMT).
U.S. inventories experience smaller draw amid cooling summer demand
According to the Energy Information Administration, U.S. oil inventories experienced a smaller-than-expected draw of 0.85 million barrels for the week ending August 23. While gasoline inventories saw a larger-than-forecast draw, distillates recorded an unexpected increase.
These mixed inventory figures heightened concerns that U.S. oil demand might decline as the busy summer travel season winds down. Ongoing worries about a slowing U.S. economy, following a series of disappointing labor market reports, also contributed to the unease.
Attention is now turning to the second-quarter U.S. gross domestic product data, slated for release later on Thursday, which may provide further insights into the world’s largest economy. Additionally, the core PCE price index data—favored by the U.S. Federal Reserve as an inflation measure—is set to be released on Friday, amid increasing optimism regarding potential interest rate cuts.
Read more: Oil prices rise on strong API data, ongoing supply concerns
Libya’s supply risks mitigate oil losses
Despite the broader losses in oil, prices were supported by certain risk factors, particularly after Libya suspended production at most of its major oilfields this week due to escalating tensions regarding the country’s central bank.
The Central Bank of Libya, the sole internationally recognized entity for managing oil export revenues, is under the control of the recognized government in the west. In contrast, the eastern region, which contains the majority of the oilfields and is governed by a separate leadership, has recently called for changes to the central bank’s management and halted all oil production.
In July, Libya produced around 1.2 million barrels per day, and any prolonged production stoppages could signal a significant global oil supply shortage.
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