Crude oil prices experienced a slight increase earlier today but soon reversed direction as the United States, European Union, and several Arab nations advocated for a temporary ceasefire between Israel and Lebanon.
In a bearish development, Saudi Arabia may abandon its $100 per barrel oil price target and increase production to regain market share, citing unnamed sources.
Regarding the potential ceasefire, a U.S. official stated, “This is an important breakthrough on the Lebanon side, given all that has gone on there” . It indicated that the coalition, which includes France, the UAE, and Saudi Arabia, is urging an immediate 21-day ceasefire in Lebanon and a similar agreement for Gaza.
Israeli UN Ambassador Danny Danon expressed that Israel does not oppose a ceasefire and prefers a diplomatic resolution, while labeling Iran as “the nexus of violence” in the region. He emphasized that Iran must be eliminated as a threat to restore peace in the Middle East.
The ongoing ceasefire discussions may influence oil prices alongside prevailing demand concerns, even as the U.S. Energy Information Administration reported a decrease in crude oil inventories for the week ending September 20.
Libya’s return to oil flow at export terminals further contributed to downward pressure on oil prices. The nation’s rival governments have agreed on a process to appoint a new central bank governor, resolving earlier disputes that had led to production shutdowns.
ANZ analysts noted that “Any revival in Libyan production would return to a market already facing concerns about weak demand in the U.S. and China”.
In contrast, the latest Dallas Fed Energy Survey indicated some positive trends, suggesting that activity in the energy sector has slightly decreased in the third quarter amid uncertainty surrounding the upcoming November elections.
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