Oil plunges 5% amid rising supplies, weak demand

September 04, 2024 (MLN): Oil plummeted — erasing its gains for the year — after a prospective deal to restore supplies from Libya turned traders’ attention back to concerns about tepid global demand for crude, Bloomberg reported

Global benchmark Brent dropped 4.9% to settle below $74 a barrel after earlier touching the lowest intraday price since mid-December 2023.

The plunge came after a Libyan central banker said a deal that would revive the OPEC nation’s output appears imminent.

With more than half a million barrels of Libyan crude possibly coming back into the market, the focus is once again on tepid global oil consumption.

Economic concerns in key consumer countries — including China and the US — have weighed on sentiment in recent months, with only occasional geopolitical concerns and minor supply disruptions masking the angst.

Looking ahead, the market is bracing for OPEC+ to gradually restore production, starting with 180,000 barrels of daily supplies within weeks.

“A toxic mix of excess supply, sliding demand, bearish technicals, and bad product fundamentals are conspiring to destroy crude oil today,” said Robert Yawger, director of the energy futures division at Mizuho Securities USA.

The concerns about China have only grown louder in recent days after a drumbeat of economic data over the weekend raised doubts that the world’s top crude importer may struggle to meet this year’s economic growth target.

Options are signaling the market is now anticipating a lower risk of futures spiking. The bias toward puts in Brent’s second-month options skew has deepened to the most bearish since early June as traders continue to protect against price drops.

The US, meanwhile, is laying the groundwork for new sanctions on Venezuelan government officials in response to Nicolás Maduro’s disputed reelection, according to documents seen by Bloomberg.

The measures target key leaders that the US says collaborated with Maduro to undermine the July 28 vote.

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