Brent trades below $75/bbl on demand growth woes

The front-month ICE Brent contract has plummeted by $3.46/bbl on the day, to trade at $73.52/bbl at 09.00 GMT.

PHOTO: Oil barrels. Getty Images

Upward pressure:

Libya's crude oil production and exports have drastically dropped this week amid the ongoing conflict in the country over the leadership of its central bank. This news has continued to put some upward pressure on Brent’s price.

Earlier this week, the country’s state-owned National Oil Corporation (NOC) declared force majeure on the El Feel oilfield, stating that the prevailing situation with oil production and export in the country is “out of its control and cannot be prevented.”

In the Middle East, hopes of a ceasefire subsided as Iran-backed Houthi armed group continued targeting commercial vessels and oil tankers transiting the Red Sea.

In August, the Yemeni militant group hit MV DELTA SOUNION, a Greek-owned oil tanker, with a missile, causing a fire onboard. The vessel is currently stranded in the Red Sea.

Downward pressure:

Brent’s price plunged lower than the $75/bbl mark as fresh economic data from the world’s top oil consumers, China and the US, disappointed the global oil market.

Manufacturing Purchasing Managers' Index (PMI) readings in China and the US came in at 49.1% and 47.2% in August, respectively. These figures fell short of market expectations, prompting concerns of a slowdown in factory activity, analysts remarked.

“Concerns over global economic growth—amplified by disappointing Chinese manufacturing data—are fueling doubts about future oil demand,” SPI Asset Management’s managing partner Stephen Innes said.

A PMI reading below 50 typically indicates weak economic health and a contraction in the manufacturing sector, which includes production, inventory levels, new orders, etc. It also highlights demand growth concerns, ultimately weighing down on prices of commodities like oil.

“The crude oil market sentiment remains under pressure as China's economic slowdown shows little sign of improvement, following data showing a further contraction in factory activity,” Saxo Bank’s head of commodity strategy Ole Hansen said.

By Aparupa Mazumder

Please get in touch with comments or additional info to news@engine. online