Oil prices extend slump on likely restoration of Libyan production, OPEC+ plans to raise output

Oil prices extended declines during Asia trading hours, after a report that Libya's oil production was set to be restored pressured prices overnight.

OPEC+ plans to raise output amid weakness in China's economy have also been dragging prices lower.

Global benchmark Brent slipped 0.57% to $73.33 a barrel, while U.S. West Texas Intermediate futures fell 0.65% to trade at $69.88 per barrel.

The slide in oil prices is the culmination of several events, said Andy Lipow, President of Lipow Oil Associates.

"First the Chinese monthly PMI showing a fourth consecutive month of contraction issued this weekend was a disappointment," he said. Over the weekend, China released its official purchasing managers' index data for August, which fell to a six-month low of 49.1.

In a note published late August, Goldman Sachs forecast a "sharp slowdown" in China's oil demand — the bulk of which is owed to the shift from oil to natural gas and power via EVs. China is the world's largest importer of oil and the second-largest consumer.

Lipow also noted that the political solution in Libya is likely to get resolved, restoring production that had been cut by 700,000 barrels per day due to a local blockade. Libya's oil reserves are the largest in Africa.

On Tuesday, U.S. crude oil futures fell more than 4% to log their lowest close since December, erasing all gains for the year, after a report said that Libya's rival governments could broker a deal that would help restore oil output following days of disruptions. The eastern government in Benghazi had cut production in a dispute with the U.N.-backed government in Tripoli over the leadership of the central bank.

Concerns about OPEC+ adding production into a perceivably oversupplied market have also been