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Oil Prices Back Down As Libya’s 3% Jump Fades

Skerdian Meta•Tuesday, August 27, 2024•2 min read

Oil prices continue to display volatility, as geopolitical tensions remain high, crashing 10% lower, only to reverse in several days, and vice versa. Yesterday WTI crude jumped more than 3% to $77.50s, being driven by tensions, as Libya announced a reduction of Oil production and exports due to disputes among different political fractions, but today we’re seeing a bearish reversal and Oil has almost given back all the gains.

The shutdown in Libya's production might not be as severe
The shutdown in Libya’s production might not be as severe

Oil prices surged by 3.5% yesterday due to the suspension of production and exports in Libya, driven by the country’s civil unrest. Several oilfields in Libya have halted operations as closures spread, according to engineers. This comes amid a conflict over the control of the central bank and oil revenues. Officials in eastern Libya, where most of the oilfields are situated, have threatened to shut down all production, escalating tensions with the internationally recognized government in Tripoli, which heavily relies on oil revenues. Libya, producing approximately 1.2 million barrels per day, mainly exports its crude to the global market, with European nations being the primary buyers.

WTI Crude Oil Chart Daily – Failing at the 200 SMA

Oil Prices Drop on Expectations of Short-Term Disruption

However, the old adage “Never trust a geopolitical rally” proved relevant once more. While political and geopolitical factors can drive oil prices up temporarily, these rallies are often unsustainable unless there is a long-term disruption in supply. U.S. crude oil futures dropped nearly 3% to close below $75.50 per barrel today. Analysts predict that the disruptions in Libya will be short-lived, with only 600,000 barrels per day expected to be removed from the market in September and 200,000 barrels per day in October, which has caused West Texas Intermediate (WTI) crude prices to decline again.

API Crude Oil Inventories Report

  • Crude Oil Drawdown: -3.4 million barrels
  • Gasoline Inventories Drawdown: -1.86 million barrels
  • Distillates Drawdown: -1.4 million barrels
  • Cushing Drawdown: -0.486 million barrels
  • Strategic Petroleum Reserve (SPR): +0.7 million barrels

This report indicates a significant drawdown across crude oil, gasoline, and distillate inventories, suggesting increased demand or decreased supply. Meanwhile, the slight increase in the Strategic Petroleum Reserve (SPR) may indicate a move to stabilize supply levels or manage market dynamics.

US WTI Crude Oil Live Chart

WTI
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ABOUT THE AUTHOR See More
Skerdian Meta
Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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