Oil prices experienced a decline early Tuesday, with Brent crude slipping below $75 per barrel for the first time this year. This drop came as worries about global oil demand continued to overshadow the impact of Libya’s reduced production.
As of 9:21 a.m. EDT, Brent Crude was down by 3.47%, trading at $74.79. Meanwhile, the U.S. benchmark, WTI Crude, fell by 2.98%, reaching $71.30.
Last week, signals from OPEC+ about a gradual easing of production cuts in October had already weakened oil prices and market sentiment. This bearish trend persisted into the new week, with oil prices under pressure during Monday’s lighter trading session due to the Labor Day holiday in New York.
Recent economic data from China contributed to the downward pressure. The latest Purchasing Managers’ Index (PMI) from the National Bureau of Statistics revealed that China’s manufacturing sector contracted for the fourth consecutive month in August, reaching its lowest level in six months. This weak data from the world’s largest crude oil importer has dampened global oil demand forecasts.
Despite a production outage in Libya providing some price support, it has not been enough to counterbalance the impact of lower-than-expected demand from China and weak refining margins in the U.S. and Europe. Ole Hansen, Head of Commodity Strategy at Saxo Bank, noted that the inability of the Libyan disruption to lift prices highlights the prevailing weak sentiment. This sentiment poses a threat to Brent and WTI‘s ability to maintain their support levels, which have held for over a year.
Hansen suggested that if Brent breaks below the $75 support level, it could lead to further selling pressure, potentially pushing prices toward the next major support level around $71.
He also pointed out that while the Libyan disruption might have given OPEC+ room to proceed with their planned production increase—starting with an additional 180,000 barrels per day next month—the risk of prices falling further below their target of $90 per barrel could lead OPEC+ to reconsider or delay this decision.