Oil drops amid imminent reactivation of Libyan supply

Oil prices plummeted, erasing their gains for the year, after a deal to restore Libyan supplies shifted market focus back to concerns about weak global crude demand.

Brent crude, the global benchmark, fell as much as 4.3%, dropping below $75 a barrel and hitting its lowest level since mid-December 2023. The decline followed comments from a Libyan banking official who suggested that an agreement to restart the OPEC country's oil production could be imminent.

With the prospect of more than 500,000 barrels per day of Libyan crude returning to the market, worries about weak global oil consumption are resurfacing. Market confidence has been shaken by economic challenges in major consumers such as China and the United States, with only minor supply disruptions and geopolitical tensions providing some short-term relief. Looking ahead, OPEC+ is expected to gradually increase production, starting with a boost of 180,000 barrels per day in the coming weeks.

“Investors may be waiting to see what OPEC+ does with production in October before daring to buy,” said Rebecca Babin, an energy specialist at CIBC Private Wealth.

Concerns about China have intensified recently, following a flurry of economic data released over the weekend that raised doubts about whether the world’s largest crude importer can meet its economic growth target for the year.