Crude futures experienced a decline on Wednesday due to concerns over future demand as crude producers sent mixed messages regarding potential supply increases. Brent crude futures dropped by 80 cents, or 1.13%, to $72.92 at 12:49 p.m. CDT (1749 GMT), while U.S. West Texas Intermediate crude futures fell by 92 cents, or 1.31%, to $69.41.
Both benchmarks initially lost $1 before rebounding to gain $1 from Tuesday's closing prices, influenced by reports that OPEC+ was considering postponing a potential output increase due to anticipated rises in Libyan production. A broader market sell-off led to Brent crude futures prices plummeting by as much as 11%, or approximately $9, over a span of just over a week, reaching a low of $72.63 on Wednesday.
The release of lackluster economic data from the U.S. and China reinforced ongoing expectations of a weaker global economy and reduced oil demand, triggering a broader downturn in global markets. "It's certainly worries about a slowdown in manufacturing," commented Phil Flynn, senior analyst at Price Futures Group. "That's the only negative we're seeing."
Meanwhile, traders speculated that a resolution might be near for the dispute halting Libyan oil exports, which could lead to an increase in available crude supply. "This sell-off shifted attention to what OPEC+’s response would be, which last week seemed poised to initiate planned output hikes in October," noted Alex Hodes, analyst at StoneX. "The group is now focused on pricing, and sources indicate that a delay to the hikes is being discussed."
Recent data releases have heightened broader concerns about weaker-than-expected demand from China, the world's largest crude importer, and impacted U.S. consumption. Chinese data revealed that manufacturing activity reached a six-month low in August, with growth in new home prices slowing. In the U.S., the Institute for Supply Management's data showed that manufacturing activity remained subdued.
Weekly U.S. inventory data has been postponed due to the Labor Day holiday. The American Petroleum Institute's report is scheduled for 4:30 p.m. EDT (2030 GMT) on Wednesday, and the U.S. Energy Information Administration's data will be released at 11:00 a.m. EDT (1500 GMT) on Thursday. A preliminary Reuters poll indicated that U.S. crude oil and gasoline stockpiles are expected to have decreased last week.
Despite traders' pessimism regarding demand, Flynn noted that changes in supply could quickly alter market sentiment. "We could flip on a dime," he said. "It could very easily turn positive. We could see a pretty decent crude draw later today."