Oil prices continued their decline on Wednesday, extending the steep drop of over 4% from the previous day, and reaching their lowest levels since December. This downward trend was driven by expectations that a political dispute disrupting Libyan exports might be resolved, along with growing concerns about weak global demand.
Brent crude futures for November delivery fell by 43 cents, or 0.6%, to $73.32 per barrel by 0645 GMT, following a 4.9% drop in the previous session. Meanwhile, U.S. West Texas Intermediate (WTI) crude for October decreased by 49 cents, or 0.7%, to $69.85 per barrel, after a 4.4% decline on Tuesday.
Both benchmarks hit their lowest points since December due to signs that a resolution could be reached in the political dispute between Libya’s rival factions, which had slashed the country’s oil output by about half and severely limited exports.
“Continued selling in Asian markets reflects expectations of a potential resolution to the dispute in Libya,” noted Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd. “The market also remains under pressure due to concerns about sluggish fuel demand, following weak economic indicators from #China and the United States.”
On Tuesday, Libya’s two legislative bodies reached an agreement to jointly appoint a central bank governor, a move that could ease the struggle for control over the country’s oil revenues, which had fueled the recent export disruptions.
Libyan oil exports from major ports were halted on Monday, and production was cut nationwide. Libya’s National #Oil Corp (NOC) declared force majeure on its El Feel oilfield starting September 2.
“With easing political tensions in Libya potentially allowing some supply to return, coupled with economic weakness in the world’s largest oil consumers—the U.S. and China—oil prices are facing a confluence of headwinds,” said Yeap Jun Rong, a market strategist at IG.
He added, “The faster contraction in new orders and production, combined with rising #prices as indicated by the #USA manufacturing PMI data, is renewing growth fears, which doesn’t bode well for the oil demand outlook.”
Market sentiment took a hit after the Institute for Supply Management’s data on Tuesday showed that U.S. manufacturing remained weak, despite a slight improvement in August from an eight-month low in July.
In #China, the world’s largest #crude importer, recent data revealed that manufacturing activity fell to a six-month low in August, while growth in new #home #prices slowed.
The release of weekly U.S. inventory data has been delayed due to Monday’s Labor Day holiday. The #American #Petroleum #Institute (#API) report is expected at 4:30 p.m. EDT (2030 GMT) on Wednesday, with the #Energy Information Administration (EIA) data scheduled for 11:00 a.m. EDT (1500 GMT) on Thursday.
Preliminary data from a #Reuters poll on Tuesday suggested that U.S. crude oil and gasoline stockpiles likely decreased last week, while distillate inventories probably increased.
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