Oil drops as Libyan supply returns and Chinese GDP disappoints

(Bloomberg) – Oil fell for a second day as a major Libyan field resumed production and China’s economic growth beat expectations.

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The global Brent benchmark fell to $79 a barrel after losing 1.8% on Friday. Production restarted at Sharara, one of Libya’s biggest oilfields, after protesters left the site, a person familiar with the matter said. Prior to last week’s disruption, it was producing about 250,000 to 260,000 barrels per day.

China’s economy grew more slowly than expected in the second quarter as consumer spending slowed markedly in June. Still, apparent demand for oil from the world’s biggest crude importer rose 14% last month from a year earlier.

Crude has rebounded over the past three weeks but remains lower this year as China’s lackluster economic recovery and the Federal Reserve’s monetary tightening campaign weighed on demand. U.S. central bank officials are expected to raise borrowing costs further this month and have signaled they are still open to further increases later in the year.

“Supply issues have eased with the resumption of production from a Libyan oil field,” said Charu Chanana, market strategist for Saxo Capital Markets Pte. in Singapore. “U.S. consumer inflation expectations that remain anchored to the upside suggest higher interest rate risks for longer,” underpinning demand concerns, she said.

Still, there are signs that the market is finally tightening this semester, with OPEC+ heavyweights Saudi Arabia and Russia both cutting their crude exports. Those restrictions, along with outages in Libya and a continued supply disruption in Nigeria, had helped Brent prices briefly top $80 a barrel last week.

The recent rise in oil means the price of Urals crude exported from Russia has exceeded the $60 price cap set by the Group of Seven to limit Moscow’s oil revenue. This risks adding banking and shipping problems for oil buyers, including India and China, with one provider of protection and compensation already reporting possible delays from financial and technical service providers.

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