By Nicole Jao
NEW YORK (Reuters) -Oil prices fell more than 2% on Wednesday as worries about supply disruptions in Libya eased and concerns about demand persisted despite China’s latest stimulus plans.
Still, declining crude oil supplies in the United States and rising tensions in the Middle East provided some support.
futures fell $1.71, or 2.27%, to settle at $73.46 a barrel. U.S. West Texas Intermediate crude fell $1.87, or 2.61%, to settle at $69.69 a barrel.
Libyan factions signed an agreement on the process for appointing the governor of the central bank, a first step to resolve the dispute over control of the central bank and oil revenues, boosting Libya’s oil production and exports has been scaled back.
“An impending resolution to the Libyan central bank crisis would restore significant oil supply, while production disruptions in the US Gulf are seen as very temporary,” said energy strategist Clay Seigle.
A hurricane threatening the U.S. Gulf Coast has changed course toward Florida and away from oil and gas producing areas near Texas, Louisiana and Mississippi.
Despite a raft of monetary support measures announced by China’s central bank on Tuesday, the boldest since the pandemic, analysts warned that more fiscal support was needed to boost activity in the world’s biggest crude oil importer.
“Concerns persisted that more budget support would be needed to boost confidence in the Chinese economy. This uncertainty cast doubt on continued demand growth, which weighed on crude oil prices,” said George Khoury, global head of education and research at CFI Financial Group.
Oil prices rose about 1.7% on Tuesday after China announced major interest rate cuts and more financing.
Meanwhile, US crude inventories fell by 4.5 million barrels to 413 million barrels in the week ended September 20, the Energy Information Administration said, compared with analysts’ expectations in a Reuters poll for a decline of 1. 4 million barrels. Gasoline and distillate stocks also fell last week.
“The trend of falling inventories is becoming too big to ignore. We hear how bad demand can be and have mixed signals,” said Phil Flynn, analyst at Price Futures Group. “Weak demand does not match this declining inventory situation,” he added.
Growing conflict between Iran-backed Hezbollah in Lebanon and Israel also supported crude oil prices, with cross-border missile launches by both sides raising fears of a wider conflict.
While Iran’s leadership has shown restraint, an attack is likely planned to save face but without angering European allies and disrupting key oil trade routes, said Achilleas Georgolopoulos, an investment analyst at brokerage XM.
