Oil prices experienced a decline on Tuesday, driven by concerns over slowing economic growth in China, the world’s largest crude importer. The drop in demand worries overshadowed the effects of halted production and exports from Libya.
By 0620 GMT, Brent crude futures had decreased by 17 cents, or 0.2%, to $77.35 per barrel. In contrast, West Texas Intermediate (WTI) crude futures rose by 50 cents, or 0.7%, to $74.05 per barrel, following a delay in Monday’s settlement due to the U.S. Labor Day holiday.
Warren Patterson of ING highlighted that oil prices are under pressure due to persistent concerns over Chinese demand. “Weaker-than-expected PMI data over the weekend has not alleviated these worries,” Patterson said, noting that these demand jitters are counteracting the impact of disruptions to Libyan supply.
China’s purchasing managers’ index (PMI) fell to a six-month low in August. Additionally, new export orders dropped in July for the first time in eight months, and new home prices saw their slowest growth of the year in August.
In Libya, oil exports from major ports were halted on Monday, and production was reduced across the country due to a political standoff over control of the central bank and oil revenue. The National Oil Corporation (NOC) declared force majeure on its El Feel oil field starting September 2. Production had plummeted to approximately 591,000 barrels per day (bpd) as of August 28, down from nearly 959,000 bpd on August 26, and from 1.28 million bpd on July 20.
Despite these disruptions, some supply is expected to return as eight OPEC+ members are set to increase output by 180,000 bpd in October. This plan is anticipated to proceed despite ongoing demand concerns. RBC Capital analyst Helima Croft suggested that potential U.S. interest rate cuts and the Libyan outage might create room for increased oil supply. “A prolonged Libyan outage could support Brent prices around $85 per barrel, even with additional supply in the fourth quarter,” Croft noted.
A recent survey indicated that OPEC’s oil output fell to its lowest level since January. Additionally, disruptions to supply from the Middle East continue to influence the market. On Monday, two oil tankers were attacked in the Red Sea off Yemen, though they did not sustain significant damage. The Iran-backed Houthis, who are targeting shipping in support of Hamas’ conflict with Israel in Gaza, claimed responsibility for the attacks.
Related topic:
Is Jet Fuel Diesel? [Revealed]
