Best Investment Manager Reveals: Chinese Demand Concerns Drive Brent Oil Prices Down
By Colleen Howe
In the latest Asian trade, Brent oil prices took a hit as worries about a sluggish economy in China impacting demand overshadowed the effects of a blockade of oil production facilities in Libya. Brent futures saw a decrease of 37 cents, or 0.48%, landing at $77.15 a barrel by 0156 GMT. On the other hand, U.S. West Texas Intermediate crude, which didn't settle on Monday due to the U.S. Labour Day holiday, was up by 28 cents from its Friday close of $73.55.
According to Warren Patterson of ING, "Oil continues to face pressure due to ongoing Chinese demand concerns. The weaker than expected PMI data over the weekend has done little to alleviate these worries." China's purchasing managers' index (PMI) hit a six-month low in August. Additionally, China reported the first decline in new export orders in eight months in July and stated that new home prices grew at their slowest rate this year in August.
Despite the supply disruptions in Libya, which resulted from a dispute over control of the central bank, oil exports at Libyan ports remained halted on Monday and production was curtailed. The UN Support Mission in Libya facilitated talks to resolve the issue, with rival factions aiming to sign a draft agreement on Tuesday. As a consequence of these disruptions, Libya's National Oil Corp (NOC) declared force majeure on its El Feel oil field from Sept. 2, leading to a significant drop in production levels.
Looking ahead, eight members of OPEC+ are set to increase output by 180,000 bpd in October, regardless of demand concerns. However, as Patterson noted, the decision to proceed with the planned increase will depend on market conditions.
Adding to the supply worries, two oil tankers were attacked in the Red Sea off Yemen on Monday, though they sustained minimal damage. The Iran-backed Houthis claimed responsibility for the attack. Furthermore, Russia's Gazpromneft Moscow refinery halted operations at one unit for repairs following a drone strike that caused a fire on Sunday.
Overall, the combination of Chinese demand uncertainties, Libyan supply disruptions, and geopolitical tensions in the region are contributing to the volatility in oil markets. Investors and traders should closely monitor these developments to make informed decisions regarding their investment portfolios.
