Oil Reverses Course As Libya, Iraq Developments Stoke Supply Fears

Meanwhile, Shell contemplates slashing 20 percent of its workforce: File Image/Pixabay

The tendency of crude traders to whiplash between demand concerns and supply tightness was fully demonstrated on Thursday when, after two sessions of losses driven by demand worries, oil rose  nearly 2 percent on tightening supplies from Libya and Iraq.

As of 1601 GMT, West Texas Intermediate was up $1.35 to $75.85 per barrel; Brent was up $1.07 to $79.72 per barrel.

Media calculated that about 700,000 barrels per day (bpd) of oil output is offline in Libya, with over half of its production capabilities offline on Thursday due to a standoff between political factions.

Additionally, a source with direct knowledge of the matter told Reuters that Iraq plans to reduce its oil output in September as part of a plan to compensate for producing over the quota agreed with the Organization of Petroleum Exporting Countries; it will reduce to between 3.85 million and 3.9 million bpd next month (it produced 4.2 million bpd in July).

Bob Yawger, executive director of energy futures at Mizuho Securities, wrote in a note, "The meltdown in Libyan crude oil production, the increasing threat of a wider war in the Middle East, and [U.S.] crude oil storage at an eight month low, are all serving as tailwinds for crude oil.

"However, crude oil bulls should proceed with caution: the longer the rally in crude oil and the higher the price, the more likely OPEC+ will be to add the 500,000 plus back to the market starting in October."

In other oil news on Thursday, Shell will reportedly cut around 20 percent of its workforce in some oil and gas exploration and development divisions pending engagement with employee representatives.

A company spokesperson stated in an email, "Shell aims to create more value with less emissions by focusing on performance, discipline and simplification across the business."

Also, ExxonMobil in its new Global Outlook noted that oil and gas will continue to be vital to world energy mix in 2050, with demand for oil remaining at above 100 million bpd, because electricity use will be 80 percent higher in 2050 than it is now.

Exxon also stated that "If every new car sold in the world in 2035 were electric, oil demand in 2050 would still be 85 million bpd. That's the same as it was in 2010."