Libyan Dispute Nears Resolution, Easing Market Tensions
– Libya’s political factions move towards a deal, potentially restoring halted oil exports.
Weak Economic Data from the U.S. and China Impact Oil Demand
Sluggish growth in the world’s largest oil consumers raises concerns over future demand.
Market Awaits Key U.S. Inventory Reports
Anticipation builds as delayed inventory data could further influence market dynamics.
Oil prices continued to fall on Wednesday after dropping more than 4% the day before. The decline is due to hopes that a political dispute in Libya, which has halted oil exports, could be resolved soon and concerns about lower global demand.
By early morning GMT, Brent crude futures for November dropped by 37 cents (0.5%) to $73.38 per barrel, following a 4.9% fall the previous day. Similarly, U.S. West Texas Intermediate crude futures for October fell by 41 cents (0.6%) to $69.93, after a 4.4% drop on Tuesday. These prices are now at their lowest since December.
The decrease in oil prices is partly due to signs of a possible deal to resolve the conflict in Libya that has significantly cut oil production and exports. According to Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd, “Selling continued in Asia as there is hope for a deal in Libya.”
Concerns over weak demand are also weighing on the market, following poor economic data from China and the United States. Libya’s two main political groups agreed on Tuesday to appoint a central bank governor together, which could help ease tensions over control of oil revenues.
On Monday, Libya halted oil exports at its major ports and reduced production nationwide. The National Oil Corporation declared a force majeure, a legal clause that frees them from contractual obligations due to unexpected events, on its El Feel oilfield from September 2.
Market strategist Yeap Jun Rong from IG pointed out that easing tensions in Libya and economic weakness in major oil-consuming countries like the U.S. and China are driving oil prices down.
The latest U.S. manufacturing data showed slower growth in new orders and production, raising concerns about the demand for oil. The Institute for Supply Management reported that U.S. manufacturing is still weak, despite a slight improvement in August.
In China, the world’s largest importer of crude oil, recent reports showed manufacturing activity at a six-month low in August, with slower growth in new home prices.
Weekly U.S. oil inventory data, usually released earlier, was delayed by the Labor Day holiday. The American Petroleum Institute is expected to release its report on Wednesday, and the Energy Information Administration will release its data on Thursday. Early estimates suggest that U.S. crude and gasoline stockpiles may have dropped last week, while distillate inventories could have increased.
