Oil prices drop again: why is crude oil falling? Libya, OPEC, the US, and China are in the spotlight.
Oil prices remain lower in trading on September 4.
Crude extended the previous day’s loss of more than 4%, following expectations of a resolution to the political dispute that is blocking Libyan exports and concerns about slower growth in global demand.
Brent crude futures for November are down 1.14% at around $72.90 a barrel and WTI is down 1.24% at around $69 a barrel as of 9:50 a.m.
Both contracts have fallen to their lowest level since December, influenced by the likely restoration of supplies from Libya, expectations of higher OPEC production, and fears of slowing global growth.
All the reasons for the drop in oil prices
The forgotten Libya returned to the spotlight in late August, triggering a surge in oil prices and raising fears of persistent instability in the country that could block oil production.
The struggle between the power factions dangerously reignited when Abdul Hamid Dbeibeh, prime minister of the Tripoli government in the west, tried to replace the governor of the Libyan central bank al-Kabir, supported by the eastern parliament and Khalifa Haftar, the warlord who controls eastern Libya.
The central bank holds billions of dollars in oil revenues, which are Libya’s only source of income and is therefore a crucial institution for those vying for power.
The situation escalated when Libyan oil exports to major ports were halted and production was reduced across the country, engineers told Reuters. Libya’s National Oil Corp (NOC) declared a state of force majeure at its El Feel oil field starting Sept. 2. Total output had fallen to just over 591,000 barrels per day (bpd) as of Aug. 28 from nearly 959,000 bpd on Aug. 26, NOC said. Output was around 1.28 million bpd on July 20, the company said.
Against this backdrop, the announcement of a likely settlement between Libya’s warring factions and the subsequent resumption of normal oil production flows has pushed crude prices lower.
But to understand the sharp drop in crude, you also need to look elsewhere. “The decline in oil prices is the result of several events,” Andy Lipow, president of Lipow Oil Associates, told CNBC.
“First, the Monthly China PMI that showed a fourth consecutive month of contraction released this weekend was a disappointment,” he said. Over the weekend, China released its official purchasing managers’ index for August, which fell to a six-month low of 49.1.
The U.S. manufacturing sector also remained weak, according to the latest data. The uncertain growth outlook for the world’s major economies is weighing on demand for crude, which is expected to decline.
Finally, OPEC has expected to increase oil production since October. With weak consumption forecasts, higher crude supplies are pushing prices lower.
Oil Price, What to Expect?
In a late August note, Goldman Sachs lowered its 2025 Brent crude forecast from $82 to $77 per barrel, adding that higher oil inventories and weak demand from China will negatively impact the market.
The bank also cut its 2025 Brent crude price forecast by $5 per barrel to $70-$85.
Earlier, Morgan Stanley lowered its 2024 global oil demand growth forecast, primarily due to China’s slower economic recovery, the country’s growing use of electric vehicles, and the rise in Chinese trucks running on liquefied natural gas (LNG).
Fawad Razaqzada, Forex Market Analyst commented on Reuters: “The fact that recent data does not show signs of an acceleration in import demand in China, Europe or North America indicates a situation where the oil market will not be as tight as expected a few months ago.”.
Geopolitical and macroeconomic factors are therefore in the spotlight more than ever to predict the oil price trajectory.
Original article published on Money.it Italy 2024-09-04 10:41:39. Original title: Perché il prezzo del petrolio continua a scendere?
