Global benchmark Brent crude oil remained above $81 a barrel, as bullish sentiment regarding U.S. demand was reinforced by supply disruptions in Libya and Nigeria. Both the Brent and U.S. West Texas Intermediate (WTI) contracts had experienced three consecutive sessions of growth and were on track to record a third consecutive week of gains for the first time since April.
The disruption in Libya stemmed from the shutdown of some oilfields due to a local tribe’s protest against the kidnapping of a former minister. Furthermore, Shell had suspended loadings of Nigeria’s Forcados crude oil as a precautionary measure in response to a potential leak at a terminal.
According to PVM analyst Tamas Varga, the halt in Libya is estimated to impact approximately 370,000 barrels per day (bpd), while the Nigerian outage is expected to result in a loss of around 225,000 bpd. Varga emphasized that if any further outages occur, the oil price could reach levels that even the most optimistic bull would not have predicted for the second half of the year.
In addition to the supply disruptions, Russian oil exports have also decreased significantly. If this trend persists, it could further drive up prices, especially since Russian oil exports are set to be reduced by 500,000 bpd in August, according to Commerzbank analysts.
As of 1013 GMT, both Brent and WTI futures were trading flat, with Brent at $81.36 a barrel and WTI at $76.89.
Furthermore, the International Energy Agency (IEA) and the Organization of the Petroleum Exporting Countries (OPEC) released reports on Thursday predicting an increase in oil demand in the second half of the year, particularly in China. Despite broader macroeconomic challenges, these forecasts provided additional support to oil prices.
National Australia Bank stated in a research note that if the OPEC forecast materializes, it could lead to oil prices exceeding $100 a barrel. The note also highlighted that the weakening value of the U.S. dollar continued to boost commodity prices.
The prospect of a slowdown in U.S. inflation has also raised hopes among market participants that the U.S. Federal Reserve may be nearing the end of its aggressive monetary policy tightening campaign, which has been the most rapid since the 1980s.
Meanwhile, Saudi Arabia and Russia, the world’s largest oil exporters, have agreed to deepen oil cuts, which have been in place since November last year. This agreement provides further support to crude prices.
In conclusion, the bullish sentiment surrounding U.S. demand, combined with supply disruptions in Libya and Nigeria, has propelled Brent crude oil above $81 a barrel. The potential for further disruptions and reductions in Russian oil exports, along with positive forecasts from the IEA and OPEC, have contributed to the market’s optimism. Additionally, factors such as the weakening U.S. dollar and the expectation of a slowdown in U.S. inflation have also supported oil prices.
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