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U.S. oil futures edged higher on Wednesday, buoyed by expectations that OPEC+ may delay a planned output increase to support the market, which has been weighed down by concerns over sluggish demand growth.
Oil Prices Climb
As of 07:55 EST (11:55 GMT), West Texas Intermediate (WTI) crude oil futures rose by 1%, trading at $71.02 per barrel, while Brent crude futures gained 0.6%, reaching $74.19 per barrel. The modest gains follow a sharp drop in prices during the previous session, where both benchmarks slumped by more than 4% to their lowest levels since mid-December.
OPEC+ Considers Output Hike Delay
The Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, are reportedly discussing a potential delay in their planned output increase, scheduled for October. According to a Reuters report, eight OPEC+ members are slated to raise production by 180,000 barrels per day (bpd) next month as part of a strategy to gradually unwind a recent output cut of 2.2 million bpd.
However, market volatility, exacerbated by oil facility shutdowns in Libya and a weak demand outlook, has led to concerns within the group. A source from OPEC+ indicated that a delay in the output increase is “highly possible” at this stage, reflecting the group’s cautious approach to stabilizing the market.
Libya’s Oil Output Disruption
The recent slump in oil prices was partly driven by news of a potential resolution to a political dispute in Libya, which has severely disrupted the country’s crude production and exports. Libya’s legislative bodies have agreed to appoint a new central bank governor within 30 days, following United Nations-sponsored discussions. This development has raised hopes for an end to the political deadlock that has hampered Libya’s oil industry.
Earlier this week, major Libyan ports ceased oil exports, and nationwide production was significantly reduced due to a standoff between rival factions vying for control of the central bank and oil revenues. The National Oil Corporation (NOC) reported a dramatic drop in production, falling from nearly 959,000 bpd on August 26 to just over 591,000 bpd on August 28. This represents a sharp decline from approximately 1.28 million bpd on July 20, highlighting the severity of the disruptions.
Demand Growth Concerns Persist
Despite the potential support from OPEC+, market sentiment remains fragile due to ongoing concerns about demand growth. On Tuesday, weak U.S. manufacturing activity data fueled fears of a possible economic slowdown in the world’s largest economy, raising the specter of a recession. These concerns, combined with economic challenges in China and Europe, have weighed on the crude market for some time.
Traders are increasingly worried that central banks, particularly the U.S. Federal Reserve, may have kept interest rates elevated for too long in their efforts to combat inflation, potentially stifling economic growth.
U.S. Inventory Data Delayed
Adding to the uncertainty, the release of weekly U.S. inventory data has been delayed due to the Labor Day holiday. The American Petroleum Institute (API) is expected to release its report later on Wednesday, with the Energy Information Administration (EIA) scheduled to publish its data on Thursday. The inventory reports will be closely watched for indications of supply and demand dynamics in the U.S. oil market.
As the week unfolds, the oil market will continue to monitor developments from OPEC+ and assess the impact of economic data on global demand prospects.
