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Oil prices eased on Friday, marking the third consecutive day of declines, as investors monitored expectations of increased output from Libya and the broader OPEC+ group. However, the decline was somewhat limited by fresh stimulus measures from China, the world’s top oil importer.
Market Overview
As of 04:33 GMT, Brent crude futures were down by 20 cents, or 0.28%, trading at $71.40 per barrel, while U.S. West Texas Intermediate (WTI) crude futures fell 14 cents, or 0.21%, to $67.53. On a weekly basis, Brent crude was set for a 4% drop, while WTI was on track to decline by 6%.
China’s Stimulus Measures Provide Some Support
China’s central bank announced a reduction in interest rates and injected liquidity into the banking system on Friday. These moves were part of efforts to boost economic growth toward this year’s target of around 5% and combat deflationary pressures. Additional fiscal measures are anticipated before China’s holidays starting October 1, after a meeting of the Communist Party’s top leaders indicated an increased urgency to address economic challenges.
Libya’s Oil Output Set to Rise
Rival factions in Libya reached an agreement on Thursday to resolve their dispute over control of the Central Bank of Libya. The disagreement had led to a significant reduction in Libya’s oil production and exports, with crude exports dropping to 400,000 barrels per day (bpd) this month, down from over 1 million bpd last month.
The resolution of this dispute could lead to the return of more than 500,000 bpd of Libyan supply to the global market, according to ANZ Bank analyst Daniel Hynes. This potential increase in Libyan output has added to concerns of oversupply in the market.
OPEC+ Production Cuts and Saudi Arabia’s Role
The Organization of Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, are currently cutting oil output by a total of 5.86 million bpd. However, they plan to reverse 180,000 bpd of those cuts in December.
A media report on Wednesday suggested that this partial reversal is linked to Saudi Arabia’s decision to abandon its previous goal of maintaining a $100 oil price target in favor of gaining market share, which contributed to a 3% drop in oil prices in the previous session.
Saudi Arabia, the de facto leader of OPEC+, has repeatedly denied targeting a specific oil price. Additionally, sources within OPEC+ told Reuters that the planned output increase in December does not indicate any significant change from the existing policy.
Conclusion
The outlook for oil prices remains uncertain, as the potential increase in Libyan supply and OPEC+ production adjustments are weighed against China’s stimulus measures. While the market is cautious about potential oversupply, the impact of China’s efforts to support its economy may help limit further declines in oil prices in the coming weeks.
