Oil Settles at 11-Week High as Supply Outages Tighten Market

Global benchmark Brent settled at an 11-week high as supply outages tightened the physical market.

(Bloomberg) — Global benchmark Brent settled at an 11-week high as supply outages tightened the physical market. 

Libya’s second-biggest oil field is in the process of shutting amid protests there. The outage of the roughly 250,000 barrel-a-day Sharara field follows disruptions at the country’s El Feel area and Nigeria’s Forcados oil terminal.

“This event is garnering heightened attention as the market has recently inflected from a surplus to a deficit,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth. “The macro backdrop has improved, making every barrel important.”

Prices recently pierced key technical levels such as the 100-day moving average, breaking out of the tight trading range they’ve been stuck in for two months after. Now traders are keeping a close watch on whether futures will cross above their 200-day moving averages — around $82.50 for Brent and $77.30 for WTI — which could trigger more buying. 

Softening US inflation, which has prompted some optimism that the Federal Reserve’s rate-hiking cycle may be nearing an end, is also supporting the commodity. 

While the International Energy Agency said global oil demand won’t grow as fast as previously expected this year due to the faltering economies of developed nations, the agency still sees record demand this year. In a separate report, the Organization of Petroleum Exporting Countries predicted an even tighter global oil market next year, as the group anticipates a much bigger demand increase than other major forecasters.

Crude is nevertheless down this year as traders continue to watch for signs of recession in the west — even amid the improving US outlook — while waiting for China’s recovery to pick up. OPEC+ heavyweights Saudi Arabia and Russia are removing barrels to prop up the market. Russia’s flagship Urals crude has breached a price cap set by the Group of Seven, a possible economic win for Moscow.

To get Bloomberg’s Energy Daily newsletter direct into your inbox, click here.

–With assistance from Yongchang Chin and Anthony Di Paola.

More stories like this are available on bloomberg.com

©2023 Bloomberg L.P.