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WTI Crude Oil Faces $75.07 Resistance as Libya’s Output Drops by 1 Million BPD

Arslan Butt•Thursday, August 29, 2024•2 min read

Oil prices edged higher on Thursday following two consecutive sessions of losses, driven by renewed concerns over supply disruptions in Libya.

The North African nation, a key member of the Organization of the Petroleum Exporting Countries (OPEC), has seen significant production interruptions due to internal conflicts, particularly over control of the central bank.

Analysts estimate that these disruptions could be as high as 900,000 to 1 million barrels per day (bpd), a substantial decrease from Libya’s July output of 1.18 million bpd. This uncertainty has injected volatility into the market, supporting prices even as other factors, like U.S. crude stock data, suggest a potential softening in demand.

  • Key Figures:
    • Libya Production Disruption: 900,000 – 1 million bpd
    • July Production: 1.18 million bpd
  • Impact on OPEC+:
    The duration of Libya’s supply issues may have broader implications for OPEC+ production strategies, particularly as the group prepares for its October meeting. A prolonged disruption could allow OPEC+ to maintain or even increase output without risking a significant oversupply, thus supporting higher prices. Conversely, a quick resolution in Libya could complicate the cartel’s decisions, especially in a market where demand remains uncertain.

U.S. Crude Stock Data: A Mixed Signal for the Market

While supply concerns from Libya have helped stabilize oil prices, U.S. crude stock data released on Wednesday introduced a more cautious tone. According to the latest figures, U.S. crude inventories fell by 846,000 barrels to 425.2 million barrels last week. However, this drawdown was significantly smaller than the 2.3 million barrel decline that analysts had expected, raising questions about the robustness of demand in the world’s largest oil-consuming nation.

  • U.S. Crude Inventory Decline: 846,000 barrels
    • Expected Decline: 2.3 million barrels
  • Market Implications:
    The smaller-than-expected draw in U.S. crude stocks suggests that demand may not be as strong as previously anticipated, which could weigh on prices if this trend continues. However, the overall impact of this data has been somewhat muted by the ongoing supply concerns in Libya and broader geopolitical tensions, which have kept the market on edge.

WTI Crude Oil Price Forecast: Technical Analysis Points to Continued Downtrend

West Texas Intermediate (WTI) crude oil is currently trading in a downward trend, with the price hovering around $74.59, just below the 50-day Exponential Moving Average (EMA) at $75.07. This EMA is acting as immediate resistance, and the overall bearish sentiment is reinforced by the Relative Strength Index (RSI), which is trending lower at 44.67, indicating weakening momentum.

  • Technical Indicators:
    • Current Price: $74.59
    • 50 EMA: $75.07
    • RSI: 44.67
  • Fibonacci Retracement Levels:
    The 0.382 Fibonacci retracement level at $75.24 is a critical hurdle for any potential recovery. Should the price fail to break above this level and the 50 EMA, the bearish outlook will likely persist. Immediate support is found at $73.80, with additional levels at $72.79 and $71.49. A break below these supports could drive prices down to the $70 mark, a key psychological level.
  • Conclusion: Traders should watch for a decisive move above the 50 EMA to reconsider the bearish scenario. Until then, the technical indicators suggest that the path of least resistance is to the downside.

USOIL Price Chart - Source: Tradingview

As the market continues to balance supply disruptions from Libya with mixed signals from U.S. crude stock data, the outlook for oil prices remains uncertain. Geopolitical tensions and upcoming economic data releases will likely play significant roles in determining the next move for crude prices.

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ABOUT THE AUTHOR See More
Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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