Oil prices experienced a decline on Wednesday, extending the previous day’s drop of more than 4% and reaching their lowest levels since December. This decrease is driven by expectations that a political conflict in Libya, which has interrupted oil exports, may soon be resolved, combined with ongoing concerns about sluggish global demand.
As of 06:45 GMT, Brent crude futures for November had fallen by 43 cents, or 0.6%, settling at $73.32. This decline follows a steep drop of 4.9% on Tuesday. Similarly, U.S. West Texas Intermediate (WTI) crude futures for October decreased by 49 cents, or 0.7%, to $69.85, following a 4.4% fall the previous day.
Both Brent and WTI futures hit their lowest levels since December, reflecting market expectations that the political standoff in Libya—which has significantly reduced oil output and exports—might be resolved soon.
Toshitaka Tazawa, an analyst at Fujitomi Securities Co. Ltd., commented, “Selling continued in Asia amid expectations of a potential deal to resolve the dispute in Libya.” He also noted that the market remains under pressure due to concerns about weak fuel demand, exacerbated by disappointing economic indicators from both China and the United States.
On Tuesday, Libya’s rival legislative bodies reached an agreement to appoint a central bank governor jointly, a move that could potentially ease the control battle over oil revenues and help resolve the ongoing dispute.
The halt of oil exports from major Libyan ports and nationwide production cuts were announced on Monday. Libya’s National Oil Corporation (NOC) declared force majeure on its El Feel oilfield starting September 2.
Yeap Jun Rong, a market strategist at IG, observed, “Easing political tensions in Libya, which might see some supplies return, combined with economic weaknesses in major oil consumers like the U.S. and China, are contributing to headwinds for oil prices.” He added, “The contraction in new orders and production, along with rising prices reported in U.S. manufacturing PMI data, is renewing growth fears and not providing much reassurance about the oil demand outlook.”
Market sentiment has been dampened following data from the Institute for Supply Management, which showed that U.S. manufacturing remained subdued despite a modest improvement in August from an eight-month low in July.
In China, the world’s largest crude oil importer, manufacturing activity fell to a six-month low in August, alongside a slowdown in new home price growth.
Due to Monday’s Labor Day holiday, the release of U.S. inventory data has been delayed. The American Petroleum Institute is scheduled to release its report at 4:30 p.m. EDT (20:30 GMT) on Wednesday, while the Energy Information Administration will publish its data at 11:00 a.m. EDT (15:00 GMT) on Thursday. A preliminary Reuters poll indicated expectations of a decrease in U.S. crude oil and gasoline stockpiles last week, with a potential rise in distillate inventories.
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