Libya’s rival government halts Oil production

Crude oil prices made an unexpected recovery in the third week of August 2024, reversing a downward trend triggered by fears of a potential U.S. recession. Earlier concerns about a possible economic slowdown had pushed prices lower as investors anticipated a drop in energy demand, signaling weaker global economic conditions and the likelihood of increased oil output. However, as recession worries began to ease, renewed geopolitical tensions in the Middle East sparked a sharp turnaround in market sentiment, driving prices to new highs.

The rebound gained momentum after Libya's eastern administration announced plans to halt all oil production and exports, following an attempt by its Tripoli-based counterpart to replace the central bank’s leadership. This development stoked fears of supply disruptions, adding further upward pressure to prices.

Brent crude futures climbed above $80 per barrel on Monday, marking a third consecutive session of gains. The rally was fueled by mounting concerns over supply risks as regional instability deepened.

In addition to geopolitical factors, expectations of a more accommodative monetary policy lent support to the commodities market. Federal Reserve Chair Jerome Powell hinted at a potential rate cut last week, citing softening labor market conditions and confidence that inflation is nearing the 2% target. Despite this, market participants remain wary of sluggish energy demand due to weaker economic data from key consumer markets.

Technical outlook for WTI

WTI crude is currently testing resistance near $76.75, aligning with a downward trendline. A breakout above this level could pave the way for further gains, targeting $78.40 and potentially $80.60.