Crude Oil Market Update

By Erwin Seba

HOUSTON (Reuters) – Crude futures fell by more than $1 a barrel on Wednesday amid fluctuating trade, as concerns about future demand were mixed with signals from crude producers about potential supply increases.

Brent crude futures settled down $1.05, or 1.42%, to $72.70 a barrel, while U.S. West Texas Intermediate crude futures dropped $1.14, or 1.62%, to $69.20.

During the session, both benchmarks fluctuated, swinging by $1 in response to news that OPEC+ was considering delaying an output increase due to anticipated growth in Libyan production.

In a sweeping sell-off, Brent crude futures plummeted up to 11%, or around $9, in just over a week, reaching a low of $72.63 on Wednesday.

Weaker data from the U.S. and China intensified worries about a slowed global economy, leading to a wider decline in world markets.

Phil Flynn, senior analyst at Price Futures Group, noted, “It’s definitely worries about a slowdown in manufacturing. That’s the only negative we’re seeing.”

Additionally, there are expectations that an ongoing dispute affecting Libyan oil exports might soon conclude, potentially bringing more supply back into the market.

Alex Hodes, an analyst at StoneX, stated, “This sell-off shifted focus to OPEC+’s potential response, which recently appeared poised to commence planned output hikes in October. However, the group is now wary of pricing and is discussing delays.”

Further data releases raised concerns about weak demand from China, the largest crude importer, and diminished U.S. consumption. Recent Chinese data revealed that manufacturing activity fell to a six-month low in August, alongside falling growth in new home prices.

In the U.S., the Institute for Supply Management reported subdued manufacturing activity on Tuesday. Weekly oil inventory data was postponed due to Monday’s Labor Day holiday, with the American Petroleum Institute’s report expected at 4:30 p.m. EDT (2030 GMT) and the U.S. Energy Information Administration’s data set to be released at 11:00 a.m. EDT (1500 GMT) on Thursday.

A preliminary Reuters poll indicated expectations of declining U.S. crude and gasoline stockpiles last week.

Despite the negative sentiment around demand, Flynn mentioned that shifts in supply could quickly change the market’s outlook. “We could flip on a dime,” he remarked. “It could turn positive, and we might see a significant crude draw later today.”