International crude oil prices edged up about one per cent from a 14-month low level on Thursday, September 5, driven by a bigger-than-expected withdrawal from US inventories and a delay to hike supply by the Organisation of Petroleum Exporting Countries and its allies (OPEC+). Chinese demand fears and resolution to the Libya deal led to a multi-month low crash in Brent crude prices.
Brent futures last rose 89 cents, or 1.2 per cent, to $73.59 a barrel, while US West Texas Intermediate (WTI) crude rose 94 cents, or 1.4 per cent, to $70.14. On Wednesday, Brent settled at its lowest since June 2023, and WTI closed at its lowest since December 2023. Back home, crude oil futures last traded 0.03 per cent higher at ₹5,12 per barrel on the multi commodity exchange (MCX).
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What drove crude oil prices from multi-month low?
-The US Energy Information Administration said energy firms pulled 6.9 million barrels of crude out of storage during the week ended August 30. That was in line with the 7.4 million barrel draw reported by the American Petroleum Institute industry group on Wednesday.
-Nearly 6.3 million barrels were withdrawn during the same week last year, compared to an average decrease of 3.8 million barrels over the past five years (2019-2023). Further support came from discussions between the OPEC+ member nations about delaying output increases due to start in October.
-OPEC+ has agreed to delay a planned oil output increase for October and November after crude prices hit their lowest in 14 months. However, continued soft demand in China and the potential end of a dispute halting Libyan oil exports has pushed the group to reconsider.
-OPEC’s key coalition members will not proceed with the scheduled hike of 180,000 barrels per day (bpd) in October. OPEC is holding back a fraction of the 5.86 million bpd of output, equal to about 5.7 per cent of global demand, to support the market due to uncertainty about demand and rising supply outside the group.
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-‘’Manufacturing in China fell to a six-month low in August and Softer-than-expected demand are enforcing an upper limit on the price of crude as China is the world’s largest importer of crude oil,” said Amit Goel, Co-Founder & Chief Global Strategist, Pace 360.
‘-’China’s economy is undergoing a structural shift, making it less dependent on oil in the future, a further headwind for oil. These structural economic changes include fuel-switching to Electric Vehicles (EV) and from oil to liquified natural gas (LNG),” said Goel.
-However, fragile oil market sentiment over the prospect of more supply from OPEC+ and an end to a dispute halting Libyan exports, coupled with a weakening demand outlook, has raised concern within the oil-producing group.
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-”Libyan production is expected to resume after settlement of disputes in the country which also weighed on crude oil prices. However, the OPEC+ decision could support crude oil prices at lower levels. The dollar index also plunged amid strength in the Japanese Yen and may support crude oil prices at lower levels,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.