Oil prices continue to decline amid libya production recovery and China’s economic weakness

Singapore: As per reports, oil prices continued their downward trend during Asian trading hours on Wednesday, following reports that Libya’s oil production is expected to resume, further pressuring global prices.

The Organization of the Petroleum Exporting Countries and its allies (OPEC+) are also planning to increase output, which, coupled with economic concerns in China, has contributed to the decline in oil prices.

Reportedly, Global benchmark Brent crude fell by 0.57 percent, settling at 73.33 dollars per barrel, while U.S. West Texas Intermediate (WTI) futures dropped 0.65 percent to trade at 69.88 dollars per barrel.

According to Andy Lipow, President of Lipow Oil Associates, the recent decline in oil prices is the result of several factors. "First, the disappointing data from China’s monthly Purchasing Managers’ Index (PMI), which showed a fourth consecutive month of contraction, has impacted market sentiment," Lipow explained. China's official PMI for August, released over the weekend, fell to a six-month low of 49.1, reflecting ongoing economic struggles.

Goldman Sachs recently published a note predicting a “sharp slowdown” in China’s oil demand, primarily due to a shift from oil to natural gas and electric power, particularly as the country embraces electric vehicles (EVs). China, the world’s largest oil importer and second-largest consumer, plays a significant role in global oil demand trends.

Lipow also pointed out that Libya's ongoing political conflict, which had previously slashed production by 700,000 barrels per day due to a local blockade, is likely nearing a resolution. If resolved, this could restore Libya’s oil production, further weighing on prices. Libya holds the largest oil reserves in Africa.

Additionally, on Tuesday, U.S. crude oil futures plunged more than 4 percent, marking their lowest close since December and wiping out all gains made earlier this year. This drop followed reports suggesting that rival governments in Libya could reach an agreement to restore oil output after recent disruptions. The eastern government in Benghazi had cut production in a dispute with the U.N.-backed government in Tripoli over control of the central bank.

Concerns over OPEC+ adding more production to an already oversupplied market have also contributed to the price decline. According to Reuters, key members of the oil alliance have indicated plans to increase output by 180,000 barrels per day, further exacerbating the situation, noted Joshua Young, founder of the oil and gas investment firm Bison Interests.