SINGAPORE: Oil prices remained mostly unchanged on Wednesday, following a significant drop in the previous session that ended a three-day winning streak. This stability comes as concerns persist about potential supply disruptions from the Middle East and North Africa, coupled with worries over global fuel demand.
As of 0653 GMT, Brent crude futures saw a slight increase of 8 cents, bringing the price to $79.63 per barrel. Similarly, US West Texas Intermediate (WTI) crude futures edged up by 7 cents to $75.60 per barrel.
On Tuesday, oil prices dropped by more than 2%, snapping a three-day rally of over 7%. The decline was driven by concerns over low refinery profit margins, which dampened expectations for fuel demand, alongside data indicating that global consumption growth has fallen short of forecasts.
Despite a decline in US oil and fuel inventories last week, which provided some support to prices, the potential loss of Libyan oil production and the ongoing conflict in the Gaza Strip, which could expand to involve Iranian-backed Hezbollah militants in Lebanon, pose significant risks to the oil market.
“Geopolitical risks continue to hover over the market,” analysts at ANZ noted in a Wednesday report. Several oilfields in Libya have halted production amid a dispute between rival government factions over control of the central bank and oil revenues, threatening around 1.2 million barrels per day of output. However, there has been no official confirmation of closures from the Tripoli-based government or the National Oil Corporation (NOC), which manages Libya’s oil resources.
Meanwhile, fighting continues between Israel and Hamas militants in the Gaza Strip, with no significant progress in ceasefire negotiations. Over the weekend, exchanges of rockets and missiles between Israel and Hezbollah across the Lebanese border further escalated tensions.
“The exchange of fire between Israel and Hezbollah threatens to derail negotiations over a ceasefire,” ANZ added.
In the US, crude oil inventories dropped by 3.407 million barrels for the week ending August 23, according to market sources citing American Petroleum Institute (API) data released on Tuesday. Gasoline inventories decreased by 1.863 million barrels, and distillate stocks fell by 1.405 million barrels. The US Energy Information Administration (EIA) is expected to release additional weekly US oil storage data later on Wednesday.
