Oil extends losses on signs of end to Libyan conflict, Reuters worries

By Yuka Obayashi

TOKYO (Reuters) – Oil prices fell on Wednesday, extending a more than 4 percent drop from the previous day, on expectations that the political dispute that has halted Libyan exports could be resolved and concerns over weaker growth in global demand.

November futures were down 28 cents, or 0.4 percent, at $73.47 by 0052 GMT, after falling 4.9 percent in the previous session. U.S. West Texas Intermediate crude futures for October were down 31 cents, or 0.4 percent, at $70.03 after falling 4.4 percent on Tuesday.

Both contracts fell to their lowest level since December on signs of a deal to resolve the political dispute between rival factions in Libya, which has roughly halved production and reduced exports.

“Sales continued in Asia amid expectations of a potential deal to resolve the Libya dispute,” said Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd.

“The market also remained under pressure due to concerns about sluggish fuel demand following weak economic indicators in China and the United States,” he said.

Libya’s two legislative bodies agreed on Tuesday to jointly appoint a central bank governor, potentially defusing the battle over control of the country’s oil revenues that has sparked the current dispute.

Exports of Libyan oil to major ports were halted on Monday and production was cut across the country. Libya’s National Oil Corp (NOC) has declared force majeure on its El Feel oil field since September 2.

Market sentiment also weakened after data from the Institute for Supply Management showed on Tuesday that US output remained subdued despite a modest improvement in August from an eight-month low in July.

In China, the world’s biggest crude oil importer, recent data showed manufacturing activity fell to a six-month low in August and new home price growth slowed in August.

Weekly US inventory data was delayed by Monday’s Labor Day holiday. The report from the American Petroleum Institute will be issued on Wednesday at 16:30 EDT (2030 GMT) and the Energy Information Administration will be published on Thursday at 11:00 EDT (1500 GMT).

Oil and gasoline stockpiles were expected to have fallen last week, while distillate stockpiles were likely to rise, a preliminary Reuters poll showed on Tuesday. (EIA/S)(API/S)