By Adedapo Adesanya
Crude oil prices slumped by over 2 per cent on Wednesday as worries over supply disruptions in Libya eased with the Brent crude futures falling by $1.71 or 2.27 per cent to $73.46 a barrel and the US West Texas Intermediate (WTI) crude slipping by $1.87 or 2.61 per cent to settle at $69.69 per barrel.
An early step toward resolving the conflict over control of the central bank and oil revenue that has severely curtailed Libya’s oil output and exports was taken when the factions in the country agreed on the procedure for selecting a governor for the central bank.
Oil production at several Libyan oilfields was halted on August 27 after the rival government in the east announced a stop to all oil production and exports from Libya.
Prior to the suspension, Libya was pumping out over 1.2 million barrels of oil per day. The disagreement over the direction of the Central Bank of Libya—the only internationally recognized repository for Libya’s oil earnings—threw Libya into an even deeper political crisis.
Investors also weighed development in China as the country announced many stimulus measures including cuts to its benchmark interest rate to halt slowdown in the world’s second-largest economy.
On Wednesday, the Chinese central bank launched its most ambitious stimulus program since the pandemic, including interest rate cuts targeted at reviving the economy.
However, analysts expressed concern that additional budgetary support would be required to boost trust in the Chinese economy. This uncertainty cast doubt on continuing demand growth, pressuring prices.
Meanwhile, there was a flicker of hope over falling US inventories and development in the Middle East.
The latest weekly data by the U.S. Energy Information Administration (EIA) revealed that US oil stockpiles fell by 4.34 million barrels last week; gasoline (petrol) inventories declined by 3.44 million barrels while distillate stocks were down by 1.12 million barrels.
The intensifying Middle East conflict between Israel and Iran-backed Hezbollah in Lebanon is also offering support for crude prices, with cross-border rockets launched by both sides increasing fears of a wider conflict.
Prior to the suspension, Libya was pumping out over 1.2 million barrels of oil per day. The disagreement over the direction of the Central Bank of Libya—the only internationally recognized repository for Libya’s oil earnings—throws Libya into an even deeper political crisis.
Dipo Olowookere