The world’s financial markets were shaken as West Texas Intermediate (WTI) Oil price extended its losses for the second day in a row, trading around $69.40 per barrel during the Asian session on Wednesday. The drop in crude Oil prices was driven by the potential resolution of a political dispute in Libya that has halted exports and concerns over slowing global demand growth.
Libya’s two legislative bodies agreed on Tuesday to jointly appoint a central bank governor, potentially easing the conflict over control of the country’s Oil revenue that sparked the recent dispute. The potential agreement to restore the Oil supply could result in more than 500,000 barrels per day returning to the market, impacting global Oil prices.
Further contributing to the market sentiment was data from the Institute for Supply Management, which showed that US manufacturing remained sluggish. The US ISM Manufacturing PMI inched up to 47.2 in August from 46.8 in July, falling short of market expectations. This marks the 21st contraction in US factory activity over the past 22 months, signaling a potential slowdown in the US economy.
China, the world’s biggest crude importer, also showed signs of economic slowdown as manufacturing activity fell to a six-month low in August. Factory gate prices dropped significantly, prompting Chinese policymakers to consider increasing stimulus for households to boost economic growth.
In addition to these factors, Oil prices are under pressure from OPEC+ plans to increase production in the coming quarter. OPEC+ is set to move forward with a planned increase in Oil output starting in October, with eight members raising production by 180,000 barrels per day. This decision could further impact global Oil prices and supply levels.
Analysis:
The resolution of the political dispute in Libya and the potential increase in Oil supply could lead to a decrease in global Oil prices, benefiting consumers but impacting Oil-producing countries. The sluggish US manufacturing data and China’s economic slowdown indicate potential challenges for global economic growth, which could further impact financial markets. Investors should closely monitor developments in these areas to make informed decisions regarding their investments and financial strategies.