2024/09/16

Oil prices stabilize following the resumption of Libyan exports

Oil prices have stabilized after posting their first weekly gain in a month, as a decline in Libyan exports offset signs of a deepening economic slowdown in China.

Brent crude futures were trading near $72 a barrel, while West Texas Intermediate rose to around $69. Libyan exports fell sharply as UN-led talks failed to break a deadlock over control of the central bank, which has extended to the oil industry.

Data released over the weekend showed that China's industrial output posted its longest losing streak since 2021 and investment declined more than expected, as the country's official economic growth target of 5% for this year appears increasingly out of reach. The deteriorating situation in the world's top crude importer — coupled with rising global supply — has sent Brent down about 17% this quarter, nearing its lowest level since late 2021.

Vivek Dhar, an analyst at Commonwealth Bank of Australia, said weak Chinese demand "is likely to persist until we see China looking to defend" its growth target. "That could be just a month away, just as we saw last year," he added, referring to Beijing's increase in its budget deficit last October.

Meanwhile, hedge funds have turned bearish on Brent, as their net short positions exceeded their long positions (by about 12,680 contracts) for the first time in data going back to 2011. However, some of the short positions began to unwind as prices recovered on Wednesday and Thursday of last week.

The market is also tracking Typhoon Bebinca, which made landfall near Shanghai. It is the biggest storm to hit China's financial capital and major shipping hub since 1949. Financial markets in China are closed on Monday and Tuesday for a national holiday.