Oil Prices Extend Losses Amid OPEC+ Production Increase and Weak Demand in China and U.S.

Oil prices continued their downward trend on Monday, driven by expectations of increased OPEC+ production starting in October and concerns over sluggish demand in the world’s two largest oil consumers, China and the United States.

Market Movements:

• Brent Crude: Fell by 61 cents, or 0.8%, to $76.32 per barrel.
• West Texas Intermediate (WTI): Declined by 52 cents, or 0.7%, to $73.03 per barrel.

These losses add to last week’s declines, where Brent dropped by 0.3% and WTI by 1.7%, marking two consecutive months of losses for both benchmarks.

OPEC+ Production Plans:

• OPEC+ is set to proceed with an oil output hike in October, according to sources within the producer group. Eight members are scheduled to increase output by 180,000 barrels per day (bpd) as part of a strategy to unwind some of the recent output cuts.
• While this increase will partially reverse the 2.2 million bpd cuts, other production reductions will remain in place until the end of 2025.

Demand Concerns in China and the U.S.:

• China: Official data released on Saturday showed that China’s manufacturing activity hit a six-month low in August, raising concerns about the country’s economic recovery. Although a private survey on Monday indicated a slight recovery in export-oriented sectors, overall demand growth remains uncertain.
• United States: U.S. oil consumption in June was reported to have slowed to its lowest seasonal levels since the pandemic began in 2020, according to the Energy Information Administration (EIA). The number of active U.S. oil rigs remained unchanged at 483 last week, as reported by Baker Hughes.

Geopolitical and Supply Factors:

• Libya: Despite ongoing disruptions due to a standoff between government factions, Libya’s Arabian Gulf Oil Company resumed production at up to 120,000 bpd to meet domestic demand. However, most of the country’s oil exports remain halted.
• Middle East Tensions: Ongoing tensions in the Middle East, particularly the Israel-Gaza conflict, continue to add uncertainty to the global oil supply outlook.

Conclusion:

Oil markets are grappling with a complex mix of factors, including rising production from OPEC+, weak demand signals from major economies, and geopolitical uncertainties. These challenges are contributing to the sustained pressure on oil prices, which have now recorded losses for two consecutive months. As the market looks ahead, the balance between supply increases and demand recovery will be crucial in determining future price movements.