Brent oil prices fell in Asian trading on Tuesday, driven by growing concerns over weakening economic conditions in China that could reduce demand, overshadowing the impact of ongoing oil production facility blockades in Libya.
As of 0156 GMT, Brent crude futures dropped by 37 cents, or 0.48%, to $77.15 a barrel. Meanwhile, U.S. West Texas Intermediate (WTI) crude, which did not settle on Monday due to the U.S. Labor Day holiday, rose 28 cents from its Friday close, reaching $73.55.
“Oil remains under pressure due to persistent concerns about Chinese demand. Weaker-than-expected PMI data over the weekend likely exacerbated these worries,” said Warren Patterson, an analyst at ING.
China’s purchasing managers’ index (PMI) for August hit a six-month low, adding to the unease. Additionally, China reported the first decline in new export orders in eight months in July and noted that new home prices grew at their slowest pace of the year in August.
“These demand jitters are clearly more than offsetting the supply disruptions from Libya,” Patterson added.
In Libya, a dispute over control of the central bank has led to a blockade of the country’s most critical commodity, oil, significantly reducing production. The United Nations Support Mission in Libya reported that it held talks on Monday to resolve the conflict, which has slashed oil production to less than half its usual levels.
Rival factions have reportedly reached a draft agreement, with plans to sign it on Tuesday, according to the UN, though no further details were provided. Despite the ongoing negotiations, oil exports at Libyan ports remained halted on Monday, and production was severely curtailed, as confirmed by six engineers who spoke to Reuters.
Libya’s National Oil Corp (NOC) declared force majeure on its El Feel oil field starting September 2. The country’s total oil production plummeted to just over 591,000 barrels per day (bpd) by August 28, down from nearly 959,000 bpd just two days earlier. This marks a significant decline from the approximately 1.28 million bpd recorded on July 20.
In the broader market, eight members of the Organization of the Petroleum Exporting Countries and affiliates, collectively known as OPEC+, are scheduled to increase output by 180,000 bpd in October. Industry sources suggest that the plan is likely to proceed despite concerns about weakening demand.
“There are suggestions they will stick to their planned increase, but much will depend on how much more weakness we see in the market,” ING’s Patterson noted.
A Reuters survey on Monday revealed that global oil output in the previous month had fallen to its lowest level since January, further exacerbating concerns about supply.
Adding to the supply worries, two oil tankers were attacked on Monday in the Red Sea off the coast of Yemen, though they did not sustain major damage. The Iran-backed Houthi rebels claimed responsibility for the attacks.
In addition, Russia’s Gazpromneft Moscow refinery temporarily suspended operations at one of its units for repairs after a fire broke out on Sunday. The fire was reportedly caused by a drone strike on the plant, which processed 11.6 million tons of crude oil last year.
