Libya-Fuelled Rally Fizzles As Traders Brace For OPEC Output Boost

Meanwhile, Russia's crude export numbers continue to impress: File Image/Pixabay

The rally generated during the three previous sessions based largely on a potential shutdown of oil fields in Libya lost steam on Tuesday, as investors weighed everything from geopolitical risks to U.S. inflation data.

Alex Kuptsikevich, senior market analyst at FxPro, said in a note to clients that "Short-term technical factors have come into play, and the three-day rally has lost momentum as the price of a barrel of WTI has risen above $77," adding that the 200-day moving average could now act as resistance to further gains, after having served as a floor for prices for much of the year.

Meanwhile, Goldman Sachs Group Inc. assessed the possible impacts of the Organization of the Petroleum Exporting Countries (OPEC) potentially beginning to add barrels to the market next quarter.

Goldman analysts including Daan Struyven stated, "We still assume that OPEC will raise production in Q4 as the market is potentially shifting from an equilibrium where OPEC supports spot balances and reduces volatility to a more long-run equilibrium focused on strategically disciplining non-OPEC supply and supporting cohesion."

Goldman also regarded the disruptions in Libya as short-lived, with 600,000 barrels per day (bpd) removed from the market in September followed by a 200,000 bpd decline in October; this fell in line with Sara Vakhshouri, founder of SVB Energy International, telling media that production in Libya, which produces about 1.2 million bpd, will decline gradually rather than suddenly going offline.

As of 1722GMT, Brent was down $1.27 to $80,16 per barrel, and West Texas Intermediate dropped $1.25 to $76.16.

In other oil news on Tuesday, and despite the ongoing sanctions against Russia by the West for invading Ukraine, the former Soviet Union's four-week average crude exports reportedly increased to 3.26 million bpd in the week to Aug. 25, rising by 60,000 bpd compared with the previous period; weekly shipments jumped 390,000 bpd.

The rise was attributed to the return of Sakhalin 2 from a month-long maintenance shutdown, and Bloomberg noted that "at least 10 shipments of crude and refined products have now been made on vessels blacklisted by the U.S., UK or the European Union, with seven of them loaded in the past five weeks."