Oil News: Weekly Gains Holding as Iraq and Libya Cutbacks Tighten Oil Supply

Oil Prices Hover Near Flat Despite Weekly Gains

Light crude oil futures remained nearly flat on Friday, trading within a narrow range as the market balanced competing supply and demand factors. Although prices held steady, they maintained gains achieved earlier in the week, driven by supply disruptions in key oil-producing regions and positive economic data from the U.S.

At 10:18 GMT, Light Crude Oil futures are trading $75.89, down $0.02 or -0.03%.

Supply Disruptions in Libya and Iraq Support Prices

Oil prices were set for a weekly gain largely due to ongoing supply concerns. In Libya, significant disruptions in oil production have taken more than half of the country’s output offline. Approximately 700,000 barrels per day (bpd) were halted as rival political factions engaged in a standoff, leading to the closure of multiple export ports. Consulting firm Rapidan Energy Group estimated that these production losses could escalate to between 900,000 and 1 million bpd, potentially lasting several weeks. This substantial reduction in supply has provided a key support level for oil prices.

Similarly, Iraq’s oil production is expected to decrease in the coming weeks. The country has reportedly exceeded its OPEC+ quota, prompting plans to reduce output in September. This reduction in Iraqi supply is anticipated to further tighten the market, adding upward pressure on prices.

U.S. Economic Data Eases Recession Fears

On the demand side, recent U.S. economic data has provided some relief to the market. Revised figures showed that the U.S. economy grew faster than initially estimated, which has eased fears of an impending recession. This has been a positive signal for oil traders, as a stronger economy typically correlates with higher energy demand. UBS analyst Giovanni Staunovo noted that the improved economic outlook suggests a “soft landing” for the U.S. economy, which in turn reduces demand concerns for oil.

Chinese Demand Weakness Caps Gains

However, signs of weakening demand from China, the world’s largest oil importer, have tempered these gains. Concerns over slower-than-expected economic growth in China have raised questions about the country’s oil consumption in the near term. This has limited the upside for oil prices, even as supply issues in Libya and Iraq continue to unfold.

Market Forecast: Bullish with Caution

Given the ongoing supply disruptions in Libya and Iraq, coupled with stronger-than-expected U.S. economic data, the near-term outlook for oil prices remains bullish. However, traders should approach with caution, as weakened demand from China could cap potential gains. Expect oil prices to remain supported in the short term, with potential for further increases if supply issues persist or worsen.

Technical Analysis

Light crude oil futures are nearly flat, while trading inside a range, suggesting a balanced fundamental picture with the fear of the unknown lending a little bullish support.

On the downside, the nearest support is the 200-day moving average at $74.30, followed by a major retracement zone at $73.43 to $71.02.

On the upside, the nearest resistance is a short-term 50% level at $76.58, followed by the 50-day moving average at $76.84 and a Fibonacci level at $78.25.