WTI slips below $70 as oil demand concerns persist

• Oil prices fell below $70 a barrel as worries about Chinese demand deepened.
• A deal between Libya’s rival governments could lead to a resumption of oil exports.
• OPEC may reconsider its planned tapering of production cuts due to lower oil prices.

Crude oil prices extended a slide that began today earlier this week as pessimism about demand, particularly from China, deepened, while expectations emerged that Libya could resume oil exports.

West Texas Intermediate fell below $70 a barrel earlier today, with Brent crude falling below $74 a barrel, after Libya’s rival governments reached an agreement to appoint a governor to Libya’s central bank that would resolve dispute that led to the shutdown of oil fields and export terminals last month. The shutdowns have decimated the country’s output by about 1.2 million barrels per day.

That disruption has sparked some optimism for oil and reports that OPEC may press ahead with a partial rollback of output cuts agreed last year, amid apparent expectations that the shutdown in Libya will extend over time. Now that that’s not the case, and oil has fallen to its lowest level since last December, chances are the cartel will keep its cuts in place to avoid risking an even bigger drop in prices.

“The easing of political tension in Libya, which could lead to a return to some supplies and economic weakness in the world’s biggest oil consumers, the US and China, serves as a confluence of headwinds for oil prices,” analyst IG Yeap told Reuters Jun Rong.

“The faster decline in new orders and production, along with rising prices, shown in the US manufacturing PMI data appears to be renewing growth fears, which does not offer much reassurance on the outlook for oil demand,” the analyst added .

Bloomberg reported that oil prices gave up all of their year-to-date gains in this latest run, noting that some of that may have been the result of a growing trend among algorithmic traders to follow price trends rather than fundamentals. Algo traders have become a force to be reckoned with in the commodity markets over the past few years.

By Irina Slav for Oilprice.com

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