Oil Prices Hold at 14-Month Low

By Scott DiSavino

NEW YORK (Reuters) – Oil prices remained at a 14-month low on Thursday due to concerns about demand in the U.S. and China, along with expected increased supplies from Libya. This outweighed a significant withdrawal from U.S. inventories and OPEC+ producers’ delays in increasing output.

Brent futures declined by 1 cent, settling at $72.69 per barrel, while U.S. West Texas Intermediate (WTI) crude dropped by 5 cents (0.1%), closing at $69.15. This marks the lowest closing price for Brent since June 2023, and for WTI, the lowest since December 2023.

The U.S. Energy Information Administration reported a draw of 6.9 million barrels of crude from storage for the week ending August 30, surpassing analyst expectations of a 1 million barrel draw, aligning more closely with the 7.4 million barrel draw reported by the American Petroleum Institute.

Support came from OPEC+ discussions delaying planned output increases set for October. OPEC+ confirmed the postponement of these increases for October and November, hinting at more pauses or reversals if necessary.

Analysts at Jefferies indicated that OPEC+’s decision could tighten fourth-quarter balances by approximately 100,000-200,000 barrels per day, helping prevent significant builds even without improved demand from China.

However, Bob Yawger, director of energy futures at Mizuho, expressed that the market was unimpressed by OPEC+’s news, suggesting that the gasoline market could be negatively impacting crude oil prices overall.

Additionally, energy firms added an unexpected 0.8 million barrels of gasoline to U.S. stockpiles, leading to a decrease in U.S. gasoline futures, which reached the lowest close since March 2021.

In Libya, some tankers commenced loading crude from storage, although output continues to be restricted due to a political standoff over the central bank and oil revenue.

Conflicting U.S. Data

The recent U.S. economic data provided some relief regarding the economy’s health, as markets sought indications of potential Federal Reserve interest rate cuts. The Fed raised rates aggressively in 2022 and 2023 to control inflation, but is widely anticipated to reduce borrowing costs at its September 17-18 policy meeting. Lower rates could stimulate economic growth and increase oil demand.

The U.S. services sector showed steady activity in August, yet employment gains slowed, indicating an easing labor market. August private job growth reached a 3.5-year low, with revisions indicating a downturn in the previous month.

In contrast, new applications for jobless benefits in the U.S. decreased last week, and layoffs remained low. Analysts from UBS noted that the recent ‘Beige Book’ report suggests the economy is growing at a below-trend pace, raising potential recession risks.