Oil Stabilizes Amid Libyas Impending Production Restart

Highlights:

• Libyan crude production set to resume after rival factions reached a compromise on central bank leadership.
• Brent crude steadied above $US73 per barrel, while WTI remained below $US70, following a 2.3% decline earlier in the week.
• US oil inventories fell by 4.5 million barrels, reaching the lowest levels since April 2022, signaling strong domestic demand.

Libyan Compromise Fuels Market Stability

Oil prices held steady following a sharp two-week decline, as Libya's rival factions reached a breakthrough agreement on leadership for the nation's central bank. This compromise is expected to pave the way for a resumption of crude production from the OPEC member.

Brent crude, a key global benchmark, traded above $US73 per barrel, while West Texas Intermediate (WTI) remained below $US70, following a 2.3% drop earlier in the week. At the time of writing, the United Nations confirmed that Libyan officials from eastern and western administrations had “initialled an agreement,” with the formal signing anticipated shortly.

Impact of Strong US Dollar and Market Sentiment

The rising strength of the US dollar added pressure on oil prices, making commodities priced in dollars more costly for non-dollar holders.

As the US dollar appreciated, oil became more expensive for investors using other currencies, further impacting prices. A stronger dollar increased the cost of dollar-denominated commodities like oil for international buyers, putting downward pressure on oil prices.

Traders are also grappling with uncertainty about global demand.

Despite initial optimism surrounding China’s stimulus measures aimed at boosting its economy, the impact on oil demand remains unclear. Furthermore, oil is expected to close its worst quarter of the year, affected by the prospect of more supply from OPEC+ and China’s sluggish economic outlook.

US Oil Consumption Trends

Meanwhile, the latest data from the US showed positive consumption trends. US commercial oil inventories dropped by 4.5 million barrels last week, reaching their lowest levels since April 2022. Gasoline and distillate stockpiles, including diesel, also decreased, suggesting robust domestic demand.

Oil markets remain sensitive to geopolitical developments and macroeconomic factors as traders assess the balance between supply and demand.

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