Oil Posts Monthly Loss As Analysts Brace For Even More Volatility

Meanwhile, Libya has lost 63 percent of its total oil production: File Image/Pixabay

Dwindling expectations for a hefty rate cut from the U.S. Federal Reserve next month – despite the Fed never once suggesting any cut would be substantial – caused oil to retreat on Friday, with one key benchmark logging a 3.6 percent drop for August.

Brent settled down $1.14, or 1.43 percent, to $78.80 per barrel, a decline of 0.3 percent for the week and 2.4 percent for the month; West Texas Intermediate settled down $2.36, or 3.1 percent, to $73.55, a drop of 1.7 percent in the week and a 3.6 percent decline in August.

U.S. consumer spending increased in July, suggesting the economy was on firmer ground early in the third quarter than originally thought and causing analysts to worry that the Fed might not enact a much-anticipated half-percentage-point interest rate cut.

Phil Flynn, senior market analyst at Price Futures Group Inc., said, "That modest inflation increase could basically solidify that we will only get a quarter percentage-point cut and those hoping for a half will have to wait."

However, Flynn said the real driver of Friday's oil trading was "OPEC talking about going ahead with tapering off production cuts," in reference to the Organization of the Petroleum Exporting Countries expected to boost supply from October, an expectation that was supported on Friday by six cartel sources.

Eight OPEC+ members are set to increase crude oil production by 180,000 barrels per day (bpd) in October as part of the group's existing plan to unwind the 2.2 million bpd of voluntary cuts.

Analysts maintained focus on Libya on Friday, whose oilfield closures have rendered an estimated 63 percent of the country's total oil production offline; Rapidan Energy Group estimated that losses could reach between 900,000 and 1 million bpd and last for several weeks.

Bloomberg noted that Libya, "coupled with a souring in sentiment over the outlook for next year and weaker consumption in China, the world's largest importer, has spurred a fresh round of price volatility over the Northern Hemisphere's summer."

The news agency also pointed out that Brent futures have traded in a range spanning $2.29 on an average daily basis in August, the widest since January.