Crude oil prices are currently trying to regain their balance after a series of losses that lasted for four consecutive sessions. Prices witnessed a slight increase during Wednesday’s trading, supported by increasing expectations of a shortage of supply in energy markets, as well as optimism about oil demand. On the supply side, oil prices received significant support as a result of Libya, one of the largest oil producers in the world, reducing its production from the Sharara field, which is one of the largest oil fields in the country, by 20%. This reduction came after protests by residents of the Fezzan region, which led to a complete shutdown of production last Monday.
In terms of demand, crude oil prices witnessed a significant increase thanks to optimism about the recovery in American demand. The US Energy Information Administration raised its expectations for domestic oil demand by 100,000 barrels per day, to reach 20.5 million barrels. The agency also expected an increase in annual consumption by 1.1 million barrels per day, to reach a total of 102.9 million barrels per day.
If the recent developments have contributed to strengthening the upward momentum of oil prices during today’s trading, as crude benefited from the growing optimism about the recovery in demand from the world’s largest economic power, which is also the largest oil consumer. In addition, the expected decrease in oil supply in the markets during the coming period supported prices after they were clearly damaged since the beginning of the week, as a result of the exacerbation of market concerns about the economic recession in the United States.
Oil prices in trading: In detail, spot prices for Brent crude contracts witnessed a 0.59% increase to reach $ 76.46 per barrel..
The US Energy Information Administration has raised its demand forecasts
Oil prices have fallen in the past few days, along with stocks, amid limited reactions to developments in the Middle East. They expect Brent crude to find support at $75 a barrel due to the limited risk of a US recession, as well as room for increased speculative positions. Oil prices recorded their fourth straight weekly decline last week amid signs of faltering demand in the United States and China, with the Asian country rolling out plans to stimulate domestic consumption over the weekend. A US government report on Tuesday showed warning signs about consumption in China, citing the Asian country’s weak economy as a reason for stalling oil demand growth.
Algorithmic traders may have helped partially halt the slide in oil prices after they approached the peak of their bearish bets, according to analysts. Investors may look to a sector report later on Tuesday to gauge US oil inventories after five straight weeks of declines, the longest stretch since early 2022. Oil prices rose 1% on Tuesday, recovering from the previous session’s losses, amid concerns that The escalating conflict in the Middle East is weighing on supplies, thanks to strong data from the US services sector and a decline in production from Libya’s Sharara oil field. Brent crude futures rose 76 cents, or 1 percent, to $77.06 a barrel.
Energy agency raises demand forecasts :On the demand side, crude oil prices rose, supported by market optimism about a recovery in US oil demand. The US Energy Information Administration raised its domestic demand forecast by 100,000 barrels per day, to a total of 20.5 million barrels per day.
The agency also expected annual consumption to increase by 1.1 million barrels per day, to a total of 102.9 million barrels per day..
Market Strategist and Analysts
Oil appears to have recouped some of its losses as broader concerns about a potential escalation in the Middle East conflict continue to add to concerns in the oil market. The prospect of a full-scale war in the Middle East has become real, threatening global supplies, the market analyst said. Oil was also supported by data released overnight showing that service sector activity in the United States, the world’s largest oil consumer,
rebounded from a four-year low in July, and gains were also made amid a broader rally in Asian stock markets after Monday’s decline. “Oil prices have received some support from a broad-based recovery in risk sentiment and stronger U.S. service sector data,” IG market strategist Yip Jun Rong said by email. “Concerns about growth risks in the U.S. have eased, thanks to the strength of its services sector, but it may take more to reassure markets of a stronger outlook for global oil demand,” he added. Concerns about falling output at Libya’s 300,000 barrel-per-day El Sharara field also supported prices. Production at the oil field, one of Libya’s largest, has fallen by about 20 percent due to protests.
Impact of increased demand on markets: The expected increase in US demand comes at a sensitive time for oil markets, as they are exposed to supply-side disruptions due to production cuts in Libya. When increased demand coincides with reduced supplies, this can lead to upward pressure on oil prices. Investors and traders in oil markets are assessing the impact of these factors together to determine the direction of prices in the near future.
Current trends in oil markets: Under current conditions, oil prices are trying to recover from the recent declines. Expectations of production cuts in Libya and increased US demand may support prices in the short term.
