Oil prices settle higher as Iraq's plan to cut output adds to ongoing supply risks

Investing.com -- Oil prices settled higher Thursday, underpinned by ongoing supply risks as crude output in Libya slumped, while Iraq detailed plans to reduce output starting next month.

At 2:30 p.m. ET (1830 GMT), Brent oil futures rose 1.7% to $77.86 a barrel, while West Texas Intermediate crude futures climbed 1.9% to $75.95 a barrel.

Supply risks persist as Libya output drops, Iraq plans to cut supplies

Libya halted production more than half of production on Thursday, taking about 700,000 barrels a day offline, Reuters reported, citing its own calculations.

The Central Bank of Libya is the only internationally recognized depository for payments for Libya’s oil exports, and is controlled by the internationally recognized government in the western side of the country.

But the eastern side, which holds most of the country’s oilfields and is controlled by separate leadership, recently called for a change in the central bank’s leadership, and shut down all oil production.

Libya produced about 1.2 million barrels per day in July, with any extended shutdowns in production heralding a global oil supply shortfall.

Adding to supply risks, Iraq said that it plans to cut oil output in September as it looks to regain compliance with the OPEC output-cut agreement following a period of above-quota production.

US economic data due

Gross domestic product grew by 3% in the last quarter, a Commerce Department report showed in its second estimate, better than expectations of a 2.8% growth and a jump from the 1.4% annualized growth seen in the first three months of the year.

The upside surprise in economic growth cooled fears that the economy is headed for a significant slowdown. As the top oil consumer, a stronger US economy suggest crude demand is likely to remain intact.

The improved data come just a day after inventory data showed a smaller than expected draw in weekly crude supplies, pointing to the easing in demand seen as the summer period nears an end.

US inventories fall by less than expected

U.S. oil inventories saw a smaller than expected draw of 0.85 million barrels in the week to August 23, data from the Energy Information Administration showed on Wednesday.

Gasoline inventories saw a bigger-than-expected draw, but distillates saw an unexpected build.

The mixed inventory readings ramped up concerns that U.S. oil demand will cool as the travel-heavy summer season comes to a close. Fears that a slowing U.S. economy will weigh on demand also remained in play, following a string of weak readings on the labor market in recent weeks.

(Peter Nurse, Ambar Warrick contributed to this article.)

This article first appeared in Investing.com