Global benchmark Brent hit an 11-week high as supply disruptions tightened the physical market.
Libya’s second-largest oil field is in the process of being shut down amid protests there. The outage at the 250,000-barrel-per-day Sharara field follows outages in the country’s El Feel area and Nigeria’s Forcados oil terminal.
“This event is getting more attention as the market has recently moved from a surplus to a deficit,” said Rebecca Babin, senior energy trader at CIBC Private Wealth. “The macro backdrop has improved, making every barrel count.”
Prices recently broke above key technical levels such as the 100-day moving average, breaking out of the tight trading range they have been stuck in for two months. Traders are now closely watching whether futures will break above their 200-day moving averages of around $82.50 for Brent and $77.30 for WTI, which could prompt further buying.
Softening US inflation, which has fueled some optimism that the Federal Reserve’s rate hike cycle may be nearing an end, is also supporting the commodity.
Although the International Energy Agency said global oil demand will not grow as fast as expected this year due to faltering economies in developed countries, the agency still sees record demand this year year. In a separate report, the Organization of the Petroleum Exporting Countries predicted an even tighter global oil market next year, as the group anticipates a much larger increase in demand than other major forecasters.
However, crude oil has fallen this year as traders continue to watch for signs of a recession in the West, even amid an improving US outlook, as they wait for China’s recovery to pick up. OPEC heavyweights + Saudi Arabia and Russia are withdrawing barrels to support the market. Russia’s flagship Urals crude has breached a maximum price set by the Group of Seven, a potential economic win for Moscow.
Prices:
- WTI for August delivery rose $1.14 to $76.89 a barrel.
- Brent for September settlement rose $1.25 to close at $81.36 a barrel.
-With the assistance of Yongchang Chin and Anthony Di Paola.
