Oil Ekes Out Gains As Supply Concerns Clash With Demand Fears

Dismal data from China contributed to bearish sentiment: File Image/Pixabay

Oil trading on Monday was tepid due not only to a public holiday in the U.S. but also because supply shortage concerns resulting from Libya's production shutdowns were offset by a focus on the Organization of the Petroleum Exporting Countries' (OPEC) impending output increases next month.

West Texas Intermediate rose 49 cents to $74.04 per barrel by 1924 GMT, and Brent settled up 59 cents at $77.52 per barrel.

Bjarne Schieldrop, chief commodity analyst at SEB, said, "The current disturbances in Libya's oil production could provide room for added supply from OPEC+; but these fluctuations have become quite normal over the last few years, meaning any outages will probably be short-lived."

Indeed, sources on Monday confirmed local reports that the Mesla, Nafoura, and Sarir fields, operated by Arabian Gulf Oil Company, had resumed operations, providing a boost of up to 230,000 barrels per day (bpd).

Also as of Monday, eight OPEC members were on board to boost output by 180,000 bpd in October in a bid to unwind their most recent supply cuts of 2.2 million bpd and keep other cuts intact until late 2025.

Meanwhile, China continued to be a major source of bearish sentiment for oil traders: it was disclosed on Saturday that the National Bureau of Statistics purchasing managers' index slipped to 49.1 from 49.4 in July, its sixth straight decline and fourth month below the 50 mark separating growth from contraction.

Also, Chinese producers reported factory gate prices at their worst in 14 months, from 46.3 in July to 42; new orders and new export orders sub-indices remained in negative territory, and hiring was suspended.

Zhiwei Zhang, chief economist at Pinpoint Asset Management, theorized, "The fiscal policy stance remains quite restrictive, which may have contributed to the weak economic momentum.

"To achieve economic stabilisation, the fiscal policy stance needs to become much more supportive, [and] with the U.S. economy slowing, exports may not be as reliable a source for growth as it was in the first half of the year."

In related oil news, Saudi Aramco, the world's top crude oil exporter, is expected to cut the official selling price of all its crude grades for Asia in October, according to refining sources; the cut was reportedly due to refining margins in China and other troubling economic factors.