By Adedapo Adesanya
The crude oil market was down by 2 per cent on Tuesday on worries that slower economic growth in the US and China could reduce energy demand offsetting production disruption from Libya.
It was observed that Brent futures fell by $1.88 or 2.3 per cent to settle at $79.55 a barrel and the US West Texas Intermediate (WTI) crude crumbled by $1.89 or 2.4 per cent to $75.53 per barrel.
This came after surging in the previous session on reports that Libya, a member of the Organisation of the Petroleum Exporting Countries (OPEC), will halt production and exports.
Libya produces about 1.2 million barrels per day with the overwhelming majority of its crude exported to the global market, and European nations serving as the main buyers.
Libya is divided between rival governments in Tripoli and Benghazi. The Benghazi government announced the production halt Monday amid a dispute with the Tripoli government over who should lead the central bank.
The east-based Benghazi government backed by military leader Khalifa Haftar is not internationally recognised but controls most of the country’s oilfields.
US oil surged because it is the best substitute for importers looking to replace the lost Libyan supply.
Goldman Sachs sees the disruptions in Libya as short-lived with 600,000 barrels per day falling off the market in September and 200,000 barrels per day in October.
In the US, consumer confidence rose to a six-month high in August, but Americans are becoming more anxious about the labour market after the unemployment rate jumped to near a three-year high of 4.3 per cent last month.
That increase in unemployment helped boost expectations the US Federal Reserve would cut interest rates next month. Lower rates can boost economic growth and oil demand.
Demand in China has softened as the world’s second-largest economy switches from gasoline-powered cars to electric vehicles.
In Germany, meanwhile, the economy shrank in the second quarter.
Goldman also slashed its forecast for Brent prices by $5 to a range of $70 to $85 per barrel and expects the global benchmark to average $77 in 2025, down from $82 previously.
Crude oil inventories in the US fell by 3.4 million barrels for the week ending August 23, according to the American Petroleum Institute (API), after analysts predicted a 3 million barrel dip.
For the week prior, the API reported a 347,000-barrel increase in crude inventories.
So far this year, crude oil inventories are more than 2 million barrels under where they were at the start of the year, having decreased by 2.642 million barrels, according to API data.
Official data from the US Energy Information Administration (EIA) on Wednesday.