Although deluged by news earlier this week of increased crude output from multiple sources and forecasts that the market will be in surplus rather than depletion mode, traders on Thursday weren't completely certain that the world will return to swimming in oil anytime soon - and as a result, U.S. crude prices once again dropped in reaction to the resumption of Libyan output, while Brent rose on concerns about spare capacity.
Specifically, West Texas Intermediate declined by 5 cents to $70.33 per barrel, and Brent rose 83 cents to $74.23 per barrel.
This time, the market is said to have ignored warnings that a spare capacity crunch could be coming down the turnpike: the International Energy Agency in its latest monthly report stated, "Rising production from Middle East Gulf countries and Russia, welcome though it is, comes at the expense of the world's spare capacity cushion, which might be stretched to the limit."
Neil Atkinson, International Energy Agency
The prospect of higher supply from members of the Vienna agreement … Is very welcome
The theory is that with the Organization of the Petroleum Exporting Countries (OPEC), Russia, and other countries now increasing output to compensate for massive declines from Venezuela and other nations, even minor disruptions in key oil-producing areas could cause price spikes.
The market also ignored Genscape data showing that inventories at the Cushing, Oklahoma delivery hub had fallen 929,399 barrels per day (bpd) from July 6 to July 10.
Instead, the focus of interest - at least for WTI traders - was on Libya, whose National Oil Corp said it would open two of its four oil export terminals, thus allowing the return of up to 850,000 bpd of high-quality crude to international markets.
There seems to be an emerging sense from the analytical community, after so many weeks of worry about a tightening market, that the minority view might be right after all and some nations are more than able to keep the market stable with relatively little effort.
This was even conceded by the IEA, whose head of the oil industry and markets division, Neil Atkinson, told CNBC, "The prospect of higher supply from members of the Vienna agreement … Is very welcome if we are going to ensure stability of oil supply to markets over the next few months."
Meanwhile, another country that spurred the worry about tightening markets - Iran, which is facing U.S. sanctions that could see a substantial number of international clients stop buying its crude by November - said it will do its best to ensure supply to India.
A statement from Tehran's embassy in New Delhi read, "Iran understands the difficulties of India in dealing with (an) unstable energy market and it has done and will do its best to ensure security of oil supply to India."
Iran has reportedly offered Indian refiners incentives, including almost-free shipping and an enhanced credit period on oil sales, and it is urging the country to expedite its investment and accelerate engagement for the development of Chabahar port in the Islamic republic.
Raveesh Kumar, foreign ministry spokesman for India, said his country is closely watching the situation and will do "whatever is mandated to be done in our national interest."
Earlier this week, OPEC in its latest monthly report said that increased production combined with slightly less growth in crude demand around the world would result in a small surplus in 2019, with the U.S. contributing the most to next year's supply growth.