Positive Analytical Sentiment For Ample Global Crude Supply Supports Prices

Even U.S. shale is credited for keeping the market balanced during the Libyan outage: File Image/PixaBay

The crude production outages in Libya that raised concern about market disruptions and caused a mild uptick in prices during the previous session proved to be no match for a well supplied global inventory - with the result on Tuesday that crude once more settled down, albeit within predictable range-bound parameters.

Brent  settled down 20 cents at $64.59 per barrel, while West Texas Intermediate also fell 20 cents, to $58.38 per barrel.

The losses were spurred by the notion that any supply disruptions could be offset by increased output from the Organization of the Petroleum Exporting Countries (OPEC), which could limit the impact on global oil markets.

For once, analysts seemed to view global inventories as beneficial, and correspondingly they either focused on good news or chose to see the upside in otherwise middling economic reports, an example of the latter being the International Monetary Fund reducing its 2020 global economic growth forecasts by a tenth of a percentage point to 3.3 percent because of sharper than expected slowdowns in India and other emerging markets.

But the IMF said the U.S.-China trade deal was another sign that trade and manufacturing activity could soon bottom out.

Also, Barclays on Tuesday stated that oil demand will rise by 1.4 million barrels per day (bpd), 50,000 bpd higher than its previous forecast.

Even the much-maligned U.S. shale boom, usually viewed as the catalyst for global market imbalance, was given its due on Tuesday when ING stated, "Market participants appear to fret less about supply disruptions in the Middle East, or at least the risk of disruptions, thanks to the impressive growth we have seen in U.S. output over recent years."

However, that didn't mean the analytical community was entirely free of concerns over supply: Phil Flynn, senior market analyst at Price Futures Group Inc., noted that the Libyan disruption shouldn't be overlooked because "there is a lot demand for light, sweet crude" among refiners working to comply with stricter fuel rules.

Meanwhile, early trading on Wednesday indicated that the positive sentiments over ample global supply may have legs: it was credited for causing oil prices to again edge lower, with investors dismissing the importance of all of Libya's crude production being halted due to military conflicts.