(Bloomberg) — Oil steadied after a sharp two-day drop, with prices still on course for a substantial weekly decline on prospects of more supply from OPEC members Saudi Arabia and Libya.
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Brent crude traded near $72 a barrel and is around 4% lower this week, with West Texas Intermediate below $68. Saudi Arabia was said to be committed to higher production, the Financial Times reported on Thursday. Rival Libyan factions agreed to appoint a new central bank governor, paving the way for resolving a row that’s slashed oil output.
“The new agreement between Libya’s eastern and western administrations could see more than 500,000 barrels a day of supply returning to market in the near term,” said Han Zhong Liang, an investment strategist at Standard Chartered Plc in Singapore. “That’s weighing on sentiment.”
Crude is on track for a second quarterly decline, with OPEC+’s plans to ease voluntary supply curbs, as well as top importer China’s tough economic outlook, weighing on futures. The Asian nation unveiled a slew of monetary and fiscal stimulus measures this week, aiding stocks as well as some commodities, but their effectiveness remains uncertain.
Futures have been whipsawed this week, with still-elevated tensions in the Middle East adding some bullishness. Israel has vowed to maintain its bombardment of Hezbollah targets in Lebanon indefinitely, undermining efforts to secure a cease-fire deal that would ease the risk of a regional war.
The swings in prices have pushed a gauge of implied volatility for Brent higher. Options markets are now pricing in a lower risk of oil futures spiking, with the premium of bearish puts — which profit from lower prices — over bullish calls for Brent widening to the most since December.
Elsewhere, Hurricane Helene barreled into the western coast of Florida, packing dangerous winds and threatening to unleash deadly flooding across several states. The storm had shut in about a quarter of Gulf of Mexico oil production as of Thursday, according to the Bureau of Safety and Environmental Enforcement.
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