Oil traded positive in the global commodities market due to expectation of an increase demand in the United States. Latest report showed a decrease in US crude oil inventories at the time the market began to eye interest rate cuts.

Supporting the uptrend, Libyan halted exports while rising tensions in the Middle East continue to tighten the supply side. The International benchmark Brent crude traded at $79.07 per barrel on Friday.

West Texas Intermediate (WTI), the American benchmark, traded at $75.97 a barrel, an increase of about 1.52% from last Friday’s session, which closed at $74.83 per barrel.

The American Petroleum Institute (API) data showed a 3.4-million-barrel fall in US crude oil inventories, against the market prediction of a 3-million-barrel draw.

The fall in the US commercial crude oil reserves supported upward price movements by reflecting market perceptions of a stronger domestic demand. Meanwhile, a potential interest rate cut decision from the Fed continues to impact oil prices.

Fed Chairman Jerome Powell last week signaled an interest rate cut, saying the ‘time has come’ for an adjustment in monetary policy.

‘The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks,’ Powell told the annual Jackson Hole symposium in the US state of Wyoming.

While it is widely anticipated that the Fed will implement a 100-basis point interest rate cut by the end of the year, it is predicted that a 50-basis point reduction might be made during the November meeting.

Concern over potential supply shortages due to the suspension of oil production in Libya supported upward price movements.

Libya Announces Huge Loss

Libya’s National Oil Corp. said that the losses incurred due to a decision by the eastern government to shut down oil and gas operations in the country have exceeded $120 million over the course of three days.

In a statement, the corporation, which controls the country’s oil resources, noted a decline in oil production rates from 1,279,386 barrels on Monday (the day the shutdown began) to 591,024 barrels on Wednesday.

On Monday, the government appointed by the House of Representatives in the east, led by Osama Hamad, declared a state of ‘force majeure’ on the entire oil sector and halted production and exports from oil fields and ports in response to the ‘storming’ of the Central Bank of Libya’s headquarters in the capital, Tripoli, by a committee tasked with transferring management from the current governor, Al-Siddiq Al-Kabir, to a new administration.

Hamad, in a video statement, attributed the decision to close down oil operations to ‘a sense of legal and social responsibility in safeguarding public funds and protecting Libyan funds and reserves at the Central Bank of Libya, as well as the revenues from oil.’

Libya relies on oil export revenues for 90% of its income, with most oil fields and ports located in areas controlled by Hamad’s government, which is supported by eastern forces led by General Khalifa Haftar.

Since mid-August, Libya has been experiencing tensions due to a crisis surrounding a decision by the Presidential Council to remove Al-Kabir as central bank governor and appoint Mohamed Al-Shoukri in his place. The move was rejected by both the House of Representatives and the State Council, arguing that it was issued by an ‘unauthorized’ entity.

In addition to the central bank crisis, Libya has been facing another crisis for the past three years characterized by a conflict between the Government of National Unity led by Abdul Hamid Dbeibeh, based in Tripoli and recognized internationally, and Hamad’s government based in Benghazi, which controls the eastern part of the country and southern cities.