U.S. crude oil rises as Libya faces supply disruption and Iraq cuts output

Libya has experienced a significant drop in oil production, losing approximately 1.5 million barrels over three days, which has resulted in a financial loss of around $120 million. The National Oil Corporation of Libya has indicated that these production disruptions could last several weeks, with estimates ranging from 900,000 to 1 million barrels per day. Concurrently, Iraq is planning to cut its oil output from 4.25 million barrels per day in July to about 3.9 million barrels per day in September, as it has been exceeding its OPEC quota. This reduction is part of a broader strategy to align with OPEC agreements and manage supply levels effectively. The current situation in Libya is exacerbated by ongoing political disputes among rival governments, which have hindered stable production. Libya typically produces around 1.2 million barrels per day, with a significant portion of its crude oil exported globally. The disruptions in Libyan oil supply are expected to have a notable impact on the U.S. crude market, as American oil is seen as a viable alternative for European buyers facing shortages. Market reactions have been influenced by these developments, with U.S. crude prices rising over 3% earlier in the week due to the Libyan disruptions. However, prices later stabilized as the extent of the outages became clearer and concerns about slowing demand in China emerged. The U.S. benchmark has fluctuated between $71 and $80 per barrel throughout August, reflecting the volatility in the market. Analysts suggest that the ongoing tensions in the Middle East, particularly between Israel and Iran, alongside low crude oil storage levels in the U.S., are contributing factors to the rising prices. As the situation evolves, there is speculation that OPEC+ may consider increasing production to stabilize the market, particularly if prices continue to rise significantly.