Oil prices are trading on a mixed note in the market, with concerns about global demand and deepening supply problems in Libya. China, the world’s largest crude oil user, has also seen a lack of demand due to economic difficulties.
China’s purchasing manager index (PMI) dropped to a six-month low in August, raising concerns about the top crude importer’s demand forecast. The country’s PMI fell by 0.3 points to 49.1 in August 2024, as China’s manufacturing industry continued to deteriorate over the preceding three months.
Meanwhile, Libya’s National Oil Corp. declared force majeure on a key oil field, which produces around 70,000 barrels a day, after exports at major ports were halted and production was curtailed across the country. Analysts now expect OPEC and its allies to stick to their plans to gradually unwind some output curbs and reintroduce some barrels into the market starting in October.
“Sustained outages at Libya could be a reason to add more barrels without weakening the fundamentals,” ANZ Research analysts say in a note. Brent crude is down 0.6% at $77.05 a barrel, while WTI is up 0.3% at $73.77 a barrel.
Meanwhile, despite the downward movement in the oil market, the OPEC+ group, which consists of OPEC and some non-OPEC producing countries, does not give up its decision to gradually reduce its voluntary additional cuts until the end of September 2025.
The group announced that the 2.2 million barrels per day (bpd) cuts will be gradually phased out on a monthly basis until the end of September 2025, and the United Arab Emirates’ (UAE) decision to increase output by 300,000 bpd.
The 38th Ministerial Meeting of OPEC and non-OPEC countries is scheduled for 1 December 2024. The decision alleviates the supply concerns of market players and aids the downward movement of prices.
On the other hand, ongoing uncertainties about the timing of the Fed interest rate cuts, continue to impact oil prices. Analysts stated that the data in the US employment report to be released on Friday might provide more information about the course of the country’s economy, and might also embody the Fed’s roadmap for the next period.
While it is certain that the US Federal Reserve (Fed) will cut interest rates by 100 basis points by the end of the year, predictions that a 50 basis point rate cut will be made at the meetings in November or December remain strong.
