PrimePress: Crude oil prices jumped by more than a dollar a barrel on Thursday, August 29, fueled by supply disruptions in Libya and plans to reduce output in Iraq, sparking concerns of a tightening market. With nearly 70,000 barrels per day of Libya’s oil production offline and exports halted at several ports due to political disputes, the market is experiencing a significant disruption.
US West Texas Intermediate crude futures surged by $1.35, or 1.8 per cent, to $75.85 a barrel, while Brent crude futures rose by $1.07, or 1.4 per cent, to $79.72 per barrel during trading. On the domestic front, crude oil futures on the multi-commodity exchange (MCX) were up by 1.24 per cent at ₹6,366 per barrel.
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What’s driving crude oil prices?
Analysts pointed to the disruption in Libyan exports and Iraq’s planned output reduction in September, aiming to comply with the agreed quota with OPEC+. Iraq, which produced 4.25 million bpd in July, intends to cut output to between 3.85 million and 3.9 million bpd next month, contributing to the tightening market.
The possibility of a substantial output cut by Iraq and the closure of an export cargo were factors boosting oil prices, although market participants are waiting to witness a tangible drop in exports. The expectation of interest rate cuts by the US central bank also provided support to oil prices.
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Anticipation of lower interest rates in the US, coupled with supply disruptions, steered the focus away from signs of weak demand, leading to a positive sentiment in the oil market. Despite a slight decline in US crude inventories last week, oil prices rebounded.
Oil prices dipped over one per cent in the previous session, with US crude inventories falling by 846,000 barrels, a smaller draw than expected by analysts.
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Where are prices headed?
The recovery of the US dollar index from lows has limited potential gains for crude oil, despite the decline in US EIA weekly inventory data. However, ongoing geopolitical tensions and reduced Libyan oil production provide support to crude oil prices.
Pranav Mer, Vice President, EBG – Commodity & Currency Research at JM Financial Services Ltd, noted that oil prices remain volatile but are trading within a range in recent weeks. Support levels are seen around 6,000-5,850, with resistance at 6,450-6,600.
Rahul Kalantri, VP Commodities at Mehta Equities Ltd, highlighted that disputes in Libya and the Russia-Ukraine conflict have put significant oil output at risk, boosting prices. He expects crude oil prices to remain volatile, with support at $73.70-$73.00 and resistance at $75.00-$75.65. In INR terms, crude oil is supported at ₹6,220-6,170, with resistance at ₹6,340-6,400.
