Oil prices stabilised somewhat on Thursday, as concerns over Libyan supplies were allayed by worries about slowing economic growth and demand
Oil prices slowed their rally somewhat on Thursday, with crude oil falling 0.64% to $72.2 (€65.8) per barrel and Brent crude oil dipping 0.51% to $77.8 (€70.9) per barrel on Thursday (4 December) afternoon. Earlier in the week, oil prices saw some gains after Libya’s largest oilfield, the Sharara, shut down completely amid protests.
Oil markets rocked by Libya’s supply pause
The Sharara oilfield can produce up to 300,000 barrels per day, and is operated in a joint venture between Equitor, Repsol, TotalEnergies, OMV and Libya’s National Oil Corporation.
Protesters mainly came from the Ubari region in the south of the country, complaining over a lack of economic opportunities, as well as escalating fuel prices. Unrest also spread to the nearby El-Feel oilfield, accounting for about 70,000 barrels per day, which is also reported to have closed.
Currently, there is no clarity on when the oilfields will reopen, with protestors unwilling to allow normal activity to resume until their demands are met. These include the implementation of a refinery in the south of the country, as well as more job opportunities, better roads, adequate fuel rations and better healthcare availability.
Libya’s two rival governments, the national unity government, backed by the UN in the west and the General Khalifa Haftar government, with the Libyan National Army (LNA) in the east, where most oilfields are, have also made the situation more delicate.
Added geopolitical concerns such as the wider impact of the Israel-Hamas war on oil supply and prices further inflamed supply concerns and supported the price rally early this week.
Unrelenting inflation in major European economies could cause higher rates for longer
However, since then, worries about slowing economic growth and lagging demand have taken centre stage.
Lacklustre economic data such as higher German and French inflation, as well as declining Euro zone business activity, has contributed. If this inflation trend continues, European Central Bank (ECB) rate cuts expected by investors as early as spring this year might be postponed.
“Crude oil traders have started the year on a cautionary note, with global growth and demand worries offsetting rising geopolitical risks related to developments in and around the Red Sea,” according to Ole Hansen, head of commodity strategy at Saxo Bank.