Oil prices fall as Libya resumes output, global demand outlook darkens

[July 22, 2022]  By Julia Payne

LONDON (Reuters) -Oil prices fell on Friday on a weakening global demand outlook and the resumption of some Libyan crude oil output.

Brent crude futures fell $1.02 to $102.84 a barrel by 1023 GMT, while U.S. West Texas Intermediate (WTI) crude futures were down $1.08 cents to $95.27 a barrel.

The global economy looks increasingly likely to be heading into a serious slowdown, just as central banks aggressively reverse ultra-loose monetary policy adopted during the pandemic to support growth, data showed on Friday.

"Things are still negative on the economic front, but we are still in a structural shortfall for prompt oil and that means physical buyers will be there to support dips knowing the uncertainty of what lies ahead on the geopolitical front," said Stephen Innes, managing partner at SPI Asset Management.

Innes said investors had next week's U.S. Federal Reserve decision on interest rates firmly on their minds. Fed officials have indicated that the central bank would likely raise rates by 75 basis points at its July 26-27 meeting.
 

"While 75 is in the cards, guidance will be important and any softening in the rate hike outlook would be great for global growth," Innes added.

While signs of softening U.S. demand weighed on oil prices and sent benchmark contracts sliding around 3% in the previous session, tight global supplies continued to keep the market buoyed.

Supply fears were easing slightly though after Libya resumed production at several oil fields earlier this week.

Crude oil storage tanks are seen at the Kinder Morgan terminal in Sherwood Park, near Edmonton, Alberta, Canada November 14, 2016. REUTERS/Chris Helgren

"Libyan production is recovering, but with clashes in the capital no one knows how long the production recovery will hold," Giovanni Staunovo, analyst at UBS, said, referring to clashes between rival factions in Libya amid growing concern that a political standoff could prompt renewed conflict.

Staunovo also the market will look to preliminary OPEC production estimates for guidance next week.

WTI has been pummelled over the past two sessions after data showed that U.S. gasoline demand had dropped nearly 8% from a year earlier in the midst of the peak summer driving season, hit by record prices at the pump.

In contrast, signs of strong demand in Asia propped up the Brent benchmark, putting it on course for its first weekly gain in six weeks.

Demand in India for gasoline and distillate fuels rose to record highs in June, despite higher prices, with total refined product consumption running at 18% more than a year ago and Indian refineries operating near their busiest levels ever, RBC analysts said.

"This signals much more than a strong recovery from COVID-plagued years," RBC analyst Michael Tran said in a note.

(Reporting by Julia Payne in London, Jeslyn Lerh in Singapore and Sonali Paul in Melbourne; Editing by Kenneth Maxwell and Susan Fenton)

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