Oil prices sank about 5 percent on Tuesday to hit their lowest level in nearly nine months amid concerns about a gap between weak demand and supply that could rise, signs of a deal to resolve the conflict that has hit output in Libya and data showing demand is being dampened by slow economic growth in China, the world’s largest crude importer.
Brent crude settled down $3.77 (4.9 percent) at $73.75 a barrel, its lowest level since Dec. 12. U.S. West Texas Intermediate (WTI), which was not traded on Monday due to the Labor Day holiday, fell $3.21 (4.4 percent) to $70.34, also a low since December.
For its part, the Mexican export mix fell by 3.84 dollars (5.5 percent) to 65.91 dollars per barrel, according to information from Pemex. This is the lowest price for Mexican crude since December 13, 2023, when it closed at 64.60 dollars per barrel.
“When you see a session like this, it’s usually due to a combination of factors,” Andrew Lebow of Commodity Research Group was quoted as saying by AFP.
The first factor is “macroeconomic weakness” illustrated by various data on the Chinese economy, which show a situation of anemic growth in the Asian giant.
“Weaker-than-expected Chinese manufacturing PMI at the weekend exacerbated concerns about the performance of the Chinese economy,” Charalampos Pissouros, an investment analyst at brokerage XM, was quoted as saying by Reuters.
Meanwhile, the ISM indicator for the US manufacturing sector showed that the sector continued to contract in August.
This lack of drive by the world’s two largest economies is affecting the price of refined products, which gives refiners a small profit margin, who then reduce their production rate and use and demand less crude oil. This reduces demand for oil.
The fall deepened after Bloomberg reported the imminent restart of oil production in Libya, halted for several days, said Giovanni Staunovo, an analyst at UBS, questioned by AFP. Increased crude supply is putting downward pressure on prices.
Libya’s legislature has agreed to appoint a new central bank governor within 30 days following UN-sponsored talks.
Libyan oil exports at major ports halted on Monday and output was cut across the country, six engineers told Reuters, continuing a standoff between rival political factions over control of the central bank and oil revenues.
“If oil prices continue to fall, OPEC+ (the alliance between OPEC and a dozen producing countries) will have to make an important decision,” said Fawad Razaqzada, an analyst at City Index. At the beginning of June, OPEC+ announced that it could increase its production from October.
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– 2024-09-07 09:13:59
