Oil prices extended their decline during Asia trading hours, driven by expectations of restored Libyan oil production and plans by OPEC+ to increase output amid concerns over the weakening Chinese economy.
Global benchmark Brent crude fell by 0.57% to $73.33 per barrel, while U.S. West Texas Intermediate (WTI) futures dropped 0.65% to $69.88 per barrel. The ongoing slide in oil prices reflects a combination of global economic concerns and geopolitical developments, according to industry experts.
Andy Lipow, President of Lipow Oil Associates, pointed to a series of recent events as the catalysts for the drop-in prices. “First, the Chinese monthly PMI showed a fourth consecutive month of contraction, which was disappointing,” Lipow noted. China’s official purchasing managers’ index (PMI) for August, released over the weekend, fell to a six-month low of 49.1, signaling continued economic challenges in the world’s second-largest economy.
In a late August report, Goldman Sachs predicted a “sharp slowdown” in China’s oil demand, attributing it largely to the nation’s shift from oil to natural gas and the increased adoption of electric vehicles (EVs). As the world’s largest oil importer and second-largest consumer, China’s reduced demand is a significant factor influencing global oil markets.
Lipow also highlighted the likelihood of a political resolution in Libya, which could lead to the restoration of oil production that had been reduced by 700,000 barrels per day due to a local blockade. Libya, home to Africa’s largest oil reserves, has been facing production disruptions amid political instability.
On Tuesday, U.S. crude oil futures fell more than 4%, reaching their lowest close since December and erasing all gains for the year. The drop followed reports that Libya’s rival governments might broker a deal to restore output after days of disruptions caused by a leadership dispute between the eastern government in Benghazi and the U.N.-backed government in Tripoli.
Further weighing on prices are concerns that OPEC+ plans to increase production by 180,000 barrels per day, potentially exacerbating an already oversupplied market. Joshua Young, founder of Bison Interests, noted that this move could further pressure oil prices as key members of the oil group signal their intention to boost output.
