By Shariq Khan
NEW YORK (Reuters) -Oil prices stabilized above a dollar a barrel on Thursday as supply disruptions in Libya and plans to cut production in Iraq raised fears of tighter global supply.
futures rose $1.29, or 1.6%, to settle at $79.94 a barrel. U.S. West Texas Intermediate crude futures rose $1.39, or 1.9%, to $75.91 a barrel.
More than half of Libya’s oil production was offline on Thursday and exports were halted at several ports due to a standoff between rival political factions. According to Reuters calculations, the country has about 700,000 barrels of oil per day offline.
“Libyan exports have held up so far, but with the closure of the export terminal that should translate into a tighter Atlantic basin,” said Giovanni Staunovo, an analyst at UBS.
Even after the lockdowns are lifted, traders will have to adapt to Libya being a wild card for the markets, said Aline Carnizelo, managing partner at Frontier Commodities.
Offline production in Libya is at imminent risk of reaching 1 million barrels per day, Carnizelo said, adding that a gradual recovery before October is unlikely.
Elsewhere, Iraq plans to cut oil production in September as part of a plan to offset production above quotas agreed with the Organization of the Petroleum Exporting Countries and its allies, a source with direct knowledge of the matter told Thursday. Reuters.
Iraq, which produced 4.25 million barrels per day in July, will cut production to between 3.85 million and 3.9 million barrels per day next month, the source said. The agreed quota is 4 million barrels per day.
“Right now the market is tight and vulnerable to upward movements,” Carnizelo said.
Expectations that the US central bank would cut interest rates next month also supported oil prices. Raphael Bostic, president of the Atlanta Federal Reserve, said it may be time for cuts as inflation has fallen further and unemployment has risen more than expected.
The disruptions and expectations of lower interest rates in the US distracted from signs of weak demand.
Oil prices fell more than 1% on Wednesday after data showed inventories fell by 846,000 barrels to 425.2 million last week, less than the 2.3 million barrel decline forecast by analysts in a Reuters poll. [EIA/S]
Total inventories of oil products in the European refining hub of Amsterdam-Rotterdam-Antwerp (ARA) rose 1.1% in the week to Thursday, data from Dutch consultancy Insights Global showed.
