Oil pumpjacks operate as the Lake Fire burns in Los Padres National Forest with evacuation warnings in the area on July 6, 2024 near Los Olivos, California.
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Oil prices extended declines during Asia trading hours, after a report that Libya’s oil production was set to be restored pressured prices overnight.
OPEC+ plans to raise output amid weakness in China’s economy have also been dragging prices lower.
Global benchmark Brent slipped 0.57% to $73.33 a barrel, while U.S. West Texas Intermediate futures fell 0.65% to trade at $69.88 per barrel.
The slide in oil prices is the culmination of several events, said Andy Lipow, President of Lipow Oil Associates.
“First the Chinese monthly PMI showing a fourth consecutive month of contraction issued this weekend was a disappointment,” he said. Over the weekend, China released its official purchasing managers’ index data for August, which fell to a six-month low of 49.1.
In a note published late August, Goldman Sachs forecast a “sharp slowdown” in China’s oil demand — the bulk of which is owed to the shift from oil to natural gas and power via EVs. China is the world’s largest importer of oil and the second-largest consumer.
Lipow also noted that the political solution in Libya is likely to get resolved, restoring production that had been cut by 700,000 barrels per day due to a local blockade. Libya’s oil reserves are the largest in Africa.
On Tuesday, U.S. crude oil futures fell more than 4% to log their lowest close since December, erasing all gains for the year, after a report said that Libya’s rival governments could broker a deal that would help restore oil output following days of disruptions. The eastern government in Benghazi had cut production in a dispute with the U.N.-backed government in Tripoli over the leadership of the central bank.
Concerns about OPEC+ adding production into a perceivably oversupplied market have also been driving prices lower, said Joshua Young, founder of oil and gas investment firm Bison Interests.
Key members of the oil group signaled that they will increase output by 180,000 barrels per day, according to Reuters.
—CNBC’s Spencer Kimball contributed to this report.
