Oil holds as lower-than-expected US stockpile draw offsets supply disruption in Libya By Reuters

By Katya Golubkova

TOKYO (Reuters) – Oil prices were largely steady on Thursday as a smaller-than-expected drawdown in inventories and continued concerns over Chinese demand offset supply disruptions from Libya.

Futures were down 1 cent, or 0.01 percent, at $78.64 a barrel by 0043 GMT, while U.S. West Texas Intermediate crude futures were up 8 cents, or 0.1 percent, at 74 .60 USD.

Both contracts lost more than 1 percent on Wednesday after data showed U.S. crude inventories fell by 846,000 barrels to 425.2 million barrels last week, short of analysts’ expectations in a Reuters poll for a draw of 2.3 million barrels. (EIA/S)

Losses were limited, however, by concerns over supply disruptions from OPEC member Libya.

A number of Libya’s oil fields have halted production amid a battle for control of the country’s central bank, with a consultancy forecasting production disruptions of between 900,000 and 1 million barrels per day (bpd) for several weeks.

In July, Libya produced about 1.18 million bpd.

“Supply issues continue to loom over the market. Libyan output has more than halved this week amid a political dispute,” ANZ Research said in a note. “Production risks falling further as more fields close.”

Expectations that the U.S. central bank will begin cutting interest rates next month also supported oil prices, with Atlanta Federal Reserve Bank President Raphael Bostic saying that with inflation falling and unemployment rising more than expected, it could be time for discounts.

Lower interest rates lower the cost of borrowing, and this can stimulate economic activity and increase demand for oil.