WTI falls below $70 as concerns over oil demand persist

Crude oil prices extended a decline that began earlier this week today as pessimism about demand, especially from China, deepened while expectations arose that Libya could resume its oil exports.

West Texas Intermediate (WTI) had dipped below $70 per barrel earlier today, with Brent crude sliding below $74 per barrel, after Libya’s rival governments reached a deal to appoint a governor to Libya’s central bank, which would resolve the dispute that prompted the shutdown of oil fields and export terminals last month. The shutdowns had decimated the country’s output of some 1.2 million barrels daily.

That outage sparked some oil optimism and reports that OPEC could go ahead with its partial rollback of production cuts agreed last year, on apparent expectations that the Libyan shutdown will extend in time. Now that this is not the case and oil has fallen to the lowest since last December, chances are the cartel will keep its cuts in place lest it risks an even bigger price slump.

“Easing political tension in Libya potentially seeing some supplies return and economic weakness in the world's largest oil consumers, U.S. and China, serve as a confluence of headwinds for oil prices,” IG analyst Yeap Jun Rong told Reuters.

“The faster contraction in new orders and production, along with increasing prices, presented in the U.S. manufacturing PMI data seems to be renewing growth fears, which does not offer much reassurance around the oil demand outlook,” the analyst added.

Bloomberg reported that oil prices have shed all the gains accumulated since the start of the year in this latest rout, noting some of that may have been the result of growing bearishness among algorithmic traders, who follow price trends rather than fundamentals. Algo traders have become a force to reckon with in commodity markets in the past few years.