Recovery of Oil Prices After IEA Warning on Supply Pressure

Oil prices rose again on Thursday towards the $75 level in international markets, recovering from a sharp decline after the International Energy Agency (IEA) warned that supply is under significant pressure.

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In the London market, the price of a barrel increased by one dollar compared to the previous close, reaching $74.40. Yesterday, it closed trading down $5.46. In the American market, a barrel was traded today at a price 50 cents higher, at $70.88. At yesterday’s close, it recorded a decrease of $3.73.

Markets were shaken yesterday by concerns over global demand in the context of U.S.-China trade tensions, which raise worries about global economic growth and fears of reduced energy consumption, especially in developing markets.

The specific trigger for the sell-off was Libya’s announcement of the reopening of oil ports. This move will allow the return of up to 850,000 barrels per day of high-quality crude oil to international markets, analysts explained.

Today, prices rose again after the International Energy Agency (IEA) warned that global supply is under significant pressure due to frequent production disruptions.

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“Prices plummeted yesterday due to waning support (but)… the decline was likely exaggerated. Strong attempts at recovery should now be expected,” explains the market situation Robin Bieber from the London brokerage firm PVM Oil Associates.

The IEA warned that production disruptions could become a major problem “as the increase in production in Middle Eastern countries in the Persian Gulf and in Russia, while welcome, comes at the expense of global spare capacity, which could be utilized to the maximum.”

Prices were also supported today by the official report from the U.S. government on inventories, which showed a decline last week of nearly 13 million barrels, the largest in almost two years, to the lowest level since February 2015.

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The Organization of the Petroleum Exporting Countries (OPEC) announced this morning that the price of a barrel of its reference basket of oil was $74.40 on Wednesday, which means it fell by $1.90 compared to the previous working day.