Oil prices saw a slight increase on Friday as investors remained wary of potential supply disruptions in the Middle East. However, indications of weakened global demand tempered these gains.
Brent crude futures for October delivery, set to expire on Friday, rose by 23 cents, or 0.3%, reaching $80.17 a barrel by 0410 GMT. The more actively traded contract for November increased by 20 cents, or 0.2%, to settle at $79.02 a barrel. Meanwhile, U.S. West Texas Intermediate (WTI) crude futures saw an 18-cent increase, or 0.2%, to $76.09 a barrel. Both Brent and WTI had seen a rise of more than $1 on Thursday, reflecting weekly gains of 1.5% and 1.7%, respectively, driven by concerns over oil supply.
Concerns over supply disruptions were heightened by ongoing issues in Libya and Iraq. “Ongoing concerns over dented Libyan supplies were magnified by Iraq’s plans to tame production, which together can dent the global supplies of oil,” stated Priyanka Sachdeva, a senior market analyst at Phillip Nova. Libya, a significant oil producer, had more than half of its production, about 700,000 barrels per day (bpd), offline on Thursday. Exports were halted at several ports due to a standoff between rival political factions. According to consulting firm Rapidan Energy Group, Libyan production losses could potentially reach between 900,000 and 1 million bpd and may last for several weeks.
In addition to the situation in Libya, Iraq’s oil production is also expected to decline. Iraq’s output recently surpassed its OPEC+ quota, prompting the country to plan a reduction in oil output to between 3.85 million and 3.9 million bpd next month, according to a source familiar with the matter.
Despite these supply concerns, both Brent and WTI are on track for declines of 0.7% and 2.3% for August, marking their second consecutive monthly drops. The market continues to be weighed down by worries over demand, especially as U.S. inventory data revealed a crude stock draw for the week ending on August 23 that was only about a third of what was expected.
Further exacerbating the demand concerns is the economic outlook of mainland China, the world’s largest crude oil importer. “The somber economic outlook of mainland China continues to be a constant headwind on oil demand,” Sachdeva noted. The market’s apprehension about future demand is evident, with ANZ analysts highlighting a weak oil balance outlook for 2025. “We believe OPEC will have no choice but to delay the phase-out of voluntary production cuts if it wants higher prices,” they said.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, are set to gradually phase out voluntary production cuts amounting to 2.2 million bpd over the course of a year, from October 2024 to September 2025. As the market remains vigilant, the balance between supply concerns and demand forecasts will continue to shape oil price movements in the coming months.
