Brent crude dropped 2.5%, settling at $71.19 per barrel, while the U.S. benchmark, West Texas Intermediate (WTI), also fell 2.5%, reaching $67.88 per barrel.
Libya’s easing supply concerns, despite China’s persistent demand issues, contributed to the decline. Beijing’s efforts to stimulate its economy have yet to significantly impact oil consumption.
Oil prices were further pressured by the potential rise in supply from Libya and Saudi Arabia, with market participants overlooking a sharp decline in U.S. inventory figures.
Recent reports suggest that opposing factions in Libya have reached a compromise on the central bank’s leadership, which could lead to an increase in Libyan oil production.
Moreover, Saudi Arabia may begin reversing voluntary production cuts from December, as it aims to regain market share, a move expected to restore normal oil production levels, putting downward pressure on prices.
Analysts expressed concern that China’s latest economic stimulus efforts may not be sufficient to boost the sluggish demand for oil, especially given that China is the world’s largest oil importer.
Experts noted that the People’s Bank of China needs to implement more substantial fiscal measures to stimulate the country’s economy.
Meanwhile, a drop in U.S. crude oil reserves limited the downward pressure on prices, suggesting stronger domestic demand. Data from the U.S. Energy Information Administration (EIA) showed that U.S. crude inventories dropped by 4.5 million barrels to 413 million barrels in the week ending September 20, well above the forecasted decline of 1.3 million barrels.