The loss of crude oil prices shows no sign of abating for the second successive month, defying two major factors that in theory should reverse the trend; they are the volatility in the Middle East around Israel and the suspension of oil exports from two key Libyan ports, coupled with slow production, across the country due to a dispute between two rival political groups.
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As of 15:00 GMT on Wednesday, the prices of WTI and Brent were at $69.57 and $72.96 respectively. The price of LNG, liquified natural gas, however, was at $2.20, perhaps in light of the onset of the fall in the northern hemisphere.
The latest manufacturing data from China, the world's second largest economy, meanwhile, partially accounts for the decline in oil prices; China's key indicator that reflects the manufacturing strength, manufacturing purchasing managers index, PMI, fell again in August to 49.1, when the expected value was 49.5 for the same period.
According to China's National Bureau of Statistics, a value of 50% is the threshold: anything below it shows a shrinking manufacturing sector whereas anything above the value is a growth; only in April this year did PMI post a modest growth at 50.4%, having been in decline for over five months.
In addition, the US crude stocks have been falling as well; yet even that did not trigger off a sustainable price hike in crude oil, defying the usual trend.
Against this backdrop, the OPEC+, Organisation of Petroleum Countries plus Russia, is facing a serious dilemma over the reversal of the some productions cuts, despite the odds being heavily against such a move: the OPEC+ promised to restore some of the production cuts announced in its 37th ministerial meeting, starting from October, 2024.
The economic landscape, as far as the oil markets are concerned, however, is not conducive for such a move; the prices have been on decline for well over two months; the OPEC+ cut back the production, citing the same reasons in order to shore up the prices; but it failed, much to their disappointment.
That's not the only challenge that the OPEC+ is facing at present: on one hand, it has been forced to rely on independent organizations to check whether the members really stick to their production quotas; some of them clearly have not stuck to them, that in turn led to being placed in a position to compensate for the excesses. on the other hand, the members want to sell as much oil as possible in order to boost their revenue; for most of the members, if not all, it is a case of making hay while the Sun shines, because no indicator shows a strong growth in demand of crude oil.
In this context, analysts wonder whether a decision by OPEC+ - restoring some of the cuts to maintaining the status quo - will make any difference. In short, OPEC+ has well and truly run out of ideas, not just to shore up oil prices, but also to maintain the unity of the group in the face of unprecedented challenges.
