Oil extends losses on prospect of higher OPEC+ supply
2024.09.01 21:03
By Florence Tan
SINGAPORE (Reuters) – Oil prices extended losses on Monday with investors weighing higher OPEC+ production from October against a sharp drop in output from Libya amid sluggish demand in China and the U.S., the world’s two biggest oil consumers.
futures fell 57 cents, or 0.7%, to $76.36 a barrel by 0108 GMT while U.S. West Texas Intermediate crude slipped 50 cents, or 0.7%, to $73.05 a barrel.
The losses followed a 0.3% decline for Brent last week and a 1.7% drop for WTI.
The Organization of the Petroleum Exporting Countries and their allies, a group known as OPEC+, is set to proceed with a planned oil output hike from October, six sources from the producer group told Reuters.
Eight OPEC+ members are scheduled to boost output by 180,000 barrels per day in October, as part of a plan to begin unwinding their most recent layer of output cuts of 2.2 million bpd while keeping other cuts in place until end-2025.
“There are concerns that OPEC will go ahead and increase output from October,” IG market analyst Tony Sycamore said.
“However, I think that outcome is price dependent in that it happens if the WTI price is closer to $80 than $70.”
In Libya, the Arabian Gulf Oil Company has resumed output at up to 120,000 bpd to meet domestic needs, while exports are still halted, engineers said on Sunday, after a standoff between factions shut most of the country’s oilfields.
Both Brent and WTI have posted losses for two consecutive months as economic concerns in China and the U.S. outweighed the disruption in Libyan supply and rising geopolitical tensions in the Middle East.
China’s manufacturing activity sank to a six-month low in August as factory gate prices tumbled and owners struggled for orders, an official survey showed on Saturday, pressuring policymakers to press on with plans to direct more stimulus to households.
“The softer-than-expected China PMI released over the weekend heightens concerns that the Chinese economy will miss growth targets,” Sycamore said.
In the U.S., oil consumption slowed in June to the lowest seasonal levels since the coronavirus pandemic of 2020, data from the U.S. Energy Information Administration showed on Friday.
“We see downside in growth in 2025, driven by economic headwinds in China and the U.S.,” ANZ analysts said in a note.
“We believe OPEC will have no choice but to delay the phase out of voluntary production cuts if it wants higher prices.”
The number of operating U.S. oil rigs were unchanged at 483 last week, Baker Hughes said in its weekly report.
