Weekly Oil Markets Recap (August 26th – August 30th, 2024)
The final week of August 2024 saw significant volatility in the global oil markets, driven by geopolitical turmoil in Libya and varying economic signals from major economies. This recap explores the key events that influenced oil prices and market sentiment during the week.
Brent Crude & WTI Performance:
Oil prices experienced notable fluctuations throughout the week, largely driven by supply disruptions in Libya. Brent Crude closed at $76.93 per barrel on Friday, down 2.64% from the previous week, while West Texas Intermediate (WTI) settled at $73.55 per barrel, marking a 1.71% decline from the previous week. Despite early-week gains due to Libyan supply concerns, both benchmarks lost ground mid-week as broader market conditions weighed on prices.
Libya’s Oil Production Crisis:
Libya’s crude oil production plunged by 700,000 barrels per day (bpd) as internal political conflict escalated. The current output dropped below 600,000 bpd, down from the previous month’s average of 1.18 million bpd. Key fields like Sharara and El Feel were shut down, and exports from all oil ports were suspended. This supply disruption initially pushed oil prices higher in the week due to Europe expected to buy U.S. shale oil to replace lost Libyan supply, however the market later adjusted as the extent of the disruption remained unclear.
Geopolitical Tensions:
The crisis in Libya deepened due to a power struggle over the leadership of the Central Bank of Libya, a key institution managing the country’s oil revenue. The Benghazi-based government, supported by military leader Khalifa Haftar, announced the shutdown of all oil production and exports, intensifying the country’s ongoing East-West divide.
Economic Indicators and Market Sentiment:
Despite the potential supply shortfall from Libya, global oil demand concerns, particularly from China, and fears of a broader economic slowdown tempered market reactions. Analysts noted that the market’s restrained response to Libya’s situation was influenced by lacklustre demand and expectations of a gradual disruption rather than an immediate, full-scale halt in supply. Market sentiment remained cautious despite the Libyan supply disruption. Energy analysts highlighted that while Libya’s situation was critical, the market’s subdued response was due to concerns about global demand and expectations of OPEC+ maintaining its production increase plans in the fourth quarter. Speculators and hedge funds showed restrained activity, contributing to the mid-week price decline
U.S. Inventory Data
Crude Oil and Gasoline Inventories:
According to the U.S. Energy Information Administration (EIA), U.S. commercial crude oil inventories decreased by 0.8 million barrels, bringing total stocks to 425.2 million barrels, approximately 4% below the five-year average for this time of year. Gasoline inventories fell by 2.2 million barrels, continuing to draw down as the summer driving season neared its end. Distillate fuel inventories saw a modest increase of 0.3 million barrels but remained 10% below the five-year average.
Refinery Activity and Imports:
U.S. crude oil refinery inputs averaged 16.9 million bpd, up 175,000 bpd from the previous week, with refineries operating at 93.3% of their operable capacity. Crude oil imports averaged 6.6 million bpd, slightly lower than the previous week.
Product Supplied:
Over the last four weeks, total products supplied averaged 20.6 million bpd, a 2.9% decrease from the same period last year. Gasoline product supplied increased by 1.1% year-on-year, indicating strong seasonal demand, while distillate fuel product supplied was down by 3.6%.
Week Ahead
As the oil markets move into September, attention will remain on Libya’s production status, with Goldman Sachs predicting that 600,000 bpd could be taken off the market in September. Additionally, the market will monitor any potential shifts in OPEC+ policies and the release of key economic data from major economies that could influence global oil demand.