Oil drops 4% after resumed production at Libyan field threatens market oversupply
oilprices slid on Thursday after renewed production in Libya prompted oversupply concerns.
- West Texas Intermediate crude contracts fell as much as 4%, to $39.27, while Brent crude declined 3.1%, to an intraday low of $41.93.
- The commodity has faced strong pressure through the coronavirus pandemic as production cuts struggle to keep up with tanking demand.
- While both futures have settled near $40 per barrel,
WTIcould sink back to the mid-30s "if the demand outlook shows further signs of faltering," said Edward Moya, senior market analyst at Oanda.
- Watch West Texas Intermediate crude trade live here.
- Watch Brent crude trade live here.
Crude oil futures sank on Thursday after revived production at a Libyan oil field sparked fears of an inventory flood.
West Texas Intermediate crude contracts slipped as much as 4%, to $39.27. Brent crude, the commodity's international standard, fell 3.1%, to an intraday low of $41.93. Both contracts retraced some gains following the decline.
The Messla oil field and the Sarir refinery restarted operations after experiencing technical issues, Bloomberg reported Thursday. Crude imports and exports had also been halted in Libya since January because of regional tensions and the country's civil war.
The new supply out of the country adds inventory to a market that largely doesn't want it.
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"Oil seems ripe for a pullback here and if the demand outlook shows further signs of faltering, WTI could settle back towards the mid-$30s," Edward Moya, a senior market analyst at Oanda, said on Thursday.
Futures have faced pressure through the coronavirus pandemic from supply buildups. Oil demand remains at historic lows, and even a slight uptick in production threatens to flood the market with unwanted inventory. When such an oversupply occurred in April, WTI contracts tanked to negative prices, shocking global
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US oil has since turned higher and loosely reconnected with its international peer's price action. But after rallying through May, prices have stabilized at $40 per barrel. With coronavirus cases surging throughout the US and some lockdown measures going back into effect, oil demand shows no signs of picking up soon.
WTI contracts for August delivery traded at $39.95 per barrel as of 12:10 p.m. ET. Brent futures traded at $42.63 per barrel.
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