Brent oil prices declined in Asian trading on Tuesday, as concerns over weakening economic conditions in China and a potential drop in demand overshadowed the impact of a blockade affecting oil production in Libya.
By 0156 GMT, Brent crude futures had fallen 37 cents, or 0.48%, to $77.15 a barrel. Meanwhile, U.S. West Texas Intermediate (WTI) crude, which did not have a settlement on Monday due to the U.S. Labor Day holiday, rose 28 cents from its Friday close of $73.55.
“Oil remains under pressure due to ongoing concerns about Chinese demand. Weaker-than-expected PMI data over the weekend has likely added to these worries,” said Warren Patterson of ING.
China’s purchasing managers’ index (PMI) fell to a six-month low in August. Additionally, on Monday, China reported its first decline in new export orders in eight months in July, along with the slowest growth in new home prices so far this year.
“These demand concerns are clearly outweighing the supply disruptions in Libya,” Patterson added.
The United Nations Support Mission in Libya reported it held talks on Monday to resolve a dispute over the control of the central bank that led to the blockade of the country’s key oil production facilities. This blockade has reduced Libya’s oil production to less than half of its usual level.
According to the UN, rival factions in Libya have reached a draft agreement and are expected to sign it on Tuesday, although details remain scarce.
Oil exports at Libyan ports were halted on Monday, and production was cut back, according to six engineers cited by Reuters. Libya’s National Oil Corporation (NOC) declared force majeure on its El Feel oil field starting September 2. Total oil production in the country had plunged to approximately 591,000 barrels per day (bpd) as of August 28, down from nearly 959,000 bpd on August 26. Production levels stood at about 1.28 million bpd on July 20.
Meanwhile, eight members of OPEC+ are set to increase output by 180,000 bpd in October, a move likely to proceed despite concerns over demand, according to industry sources.
“There are indications that they will stick to their planned increase, although much will depend on how the market evolves,” Patterson noted.
A Reuters survey on Monday showed that global oil output in the previous month fell to its lowest level since January.
Adding to the supply concerns, two oil tankers were attacked on Monday in the Red Sea off Yemen, although they did not sustain significant damage. The Iran-backed Houthis claimed responsibility for the attacks.
In Russia, Gazpromneft’s Moscow refinery halted operations at one unit for repairs after a fire broke out on Sunday following a drone strike. The plant processed 11.6 million tons of crude oil last year.
