Oil prices declined on Wednesday due to a combination of factors, including potential increases in supply and concerns over sluggish fuel demand. Brent crude futures fell by 17 cents, or 0.2%, to $73.58 per barrel by 0916 GMT. This drop followed a previous session’s decrease of 4.9%. Similarly, U.S. West Texas Intermediate (WTI) crude futures decreased by 20 cents, or 0.3%, to $70.14 after falling 4.4% on Tuesday.
The decline in oil prices is partly attributed to expectations of a potential deal to resolve the ongoing dispute in Libya. The North African country has been experiencing significant disruptions in oil production and exports due to a clash between rival factions over control of oil revenue. Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd, noted that both Brent and WTI benchmarks had dropped by $1 earlier in the day amid these expectations.
Libya’s two legislative bodies agreed on Tuesday to jointly appoint a central bank governor within the next 30 days. This move is seen as a step toward defusing the conflict, as the central bank is the sole legal repository for oil revenue and plays a crucial role in paying state salaries across Libya. However, oil exports at major Libyan ports were halted on Monday, and the National Oil Corp (NOC) declared force majeure on its El Feel oilfield starting September 2.
The market remains under pressure due to concerns over sluggish fuel demand, exacerbated by weak economic indicators from China and the United States. Recent data from China revealed that manufacturing activity dropped to a six-month low in August, accompanied by a slowdown in new home prices. In the U.S., the Institute for Supply Management reported subdued manufacturing activity.
Additionally, the weekly release of U.S. inventory data has been delayed due to Monday’s Labor Day holiday. The report from the American Petroleum Institute is scheduled for 4:30 p.m. EDT (2030 GMT) on Wednesday, while data from the Energy Information Administration will be published at 11:00 a.m. EDT (1500 GMT) on Thursday. Preliminary data from a Reuters poll suggests that U.S. crude oil and gasoline stockpiles are expected to have decreased last week.