Oil prices down 1% amid improved supply outlook, recession concerns

By Duygu Alhan

Oil prices fell by 1% on Wednesday following the efforts to resolve Libya oil field shutdown crisis and recession fears in the US, while ongoing disputes in the Red Sea limit further price declines.

International benchmark Brent crude decreased 1% to $72.75 per barrel at 10.39 a.m. local time (0739 GMT), down from the previous session's close of $73.50.

US benchmark West Texas Intermediate (WTI) fell 1.1% to $68.99 per barrel, after closing at $69.78 in the prior session.

Oil prices declined amid rising expectations that the decision to suspend oil production in Libya could be reversed.

The UN Support Mission in Libya (UNSMIL) said it hosted separate talks on Monday in Tripoli to resolve a crisis surrounding the Central Bank of Libya.

The discussions were concluded with "significant understanding" to address the crisis and restore the confidence of Libyans and international partners in the vital institution.

"They further agreed to submit the draft agreement to their respective Chambers for review, with the aim of finalizing and signing the agreement on Tuesday," UNSMIL added.

These compromises have eased market players' concerns about possible supply shortages, putting downward pressure on oil prices.

Meanwhile, macroeconomic data released in the US on Tuesday, supported the predictions the world's largest oil consuming country could go into recession and caused prices to decline.

The US Institute of Supply Management's (ISM) Manufacturing Purchasing Managers Index (PMI) rose to 47.2 in August, but remained below market expectations. S&P Global's manufacturing PMI came in at 47.9 in August, slightly below estimates.

After the PMI data, which indicated the continuous contraction in the manufacturing sector, the US 10-year Treasury bond yield fell 4.83%, down 9 basis points.

On the other hand, ongoing conflicts in the Red Sea, a major route for oil and fuel shipments, limit further price decreases by heightening concerns about supply disruptions.

Yemen’s Houthi group said Monday that it targeted an oil tanker in the Red Sea with drones and missiles for breaching its embargo on vessels entering Israeli ports.

The Houthis have been targeting Israeli-linked cargo ships in the Red Sea and Gulf of Aden in solidarity with the Gaza Strip, which has been under an Israeli onslaught since Oct. 7 last year.​​​​​​​