By Adedapo Adesanya
Brent crude fell by $1.05 or 1.42 per cent to $72.70 per barrel on Wednesday as traders worried about demand in coming months as crude producers offered mixed signals about supply increases.
This is not good news for Nigeria, which pegged its crude oil benchmark for the 2024 budget at $77.96 per barrel.
Also, the US West Texas Intermediate (WTI) crude futures depreciated at the midweek session by $1.14 or 1.62 per cent to sell at $69.20 per barrel.
The market had initially swung up after news that the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) were discussing delaying a possible output increase because Libyan production is expected to rise.
Prices had earlier in the week been weighed down by speculation that started at the end of last week that OPEC+ would begin adding 180,000 barrels per day in October, as previously planned.
The alliance is discussing a delay, delegates from OPEC+ told Bloomberg while Reuters reported that there are suggestions to delay the increase while another source noted that a delay is looking “highly possible” at this point.
Most OPEC+ producers need prices well above $80 per barrel to balance their budgets.
Meanwhile, traders believed there could be an end in sight to a dispute halting Libyan oil exports, which would bring more crude supply back online.
Concerns about oil demand in China, fears of slowing US and European economies, and hopes of a restart of Libya’s production halt also added to the bearish sentiment in the market in recent days.
Recent data releases fed concerns of weak demand from China, the world’s biggest crude importer, and U.S. consumption taking a hit with the latest Chinese data showing manufacturing activity sank to a six-month low in August when growth in new home prices slowed while the US, the Institute for Supply Management (ISM) data showed manufacturing remained subdued.
Weekly US oil inventory data was delayed by Monday’s Labor Day holiday so the data from the American Petroleum Institute (API) released on Wednesday showed that crude oil inventories in the US fell by a staggering 7.4 million barrels for the week ending August 30. For the week prior, the API reported a 3.4-million-barrel decrease in crude inventories.
So far this year, crude oil inventories are more than 2 million barrels under where they were at the start of the year, having decreased by 10 million barrels, according to API data.
Official data from the US Energy Information Agency (EIA) will be released later on Thursday.
Dipo Olowookere