08:50 AM EDT, 08/28/2024 (MT Newswires) -- Oil traded lower for a second day early on Wednesday, retreating on demand concerns despite a report showing a larger than expected drop in U.S. inventories last week and the threatened withdrawal of more than one-million barrels per day of Libyan exports.

West Texas Intermediate crude for October delivery was last seen down US$1.09 to US$74.44 per barrel, while October Brent crude, the global benchmark, was down US$1.08 to US$78.47.

The drop comes even as the American Petroleum Institute's weekly survey showed U.S oil inventories fell by 3.41-million barrels, above the consensus estimate for a 3.0-million barrel drop, according to Oilprice.com. Gasoline and distillate inventories also fell. The Energy Information Administration will release official inventory data later on Wednesday morning.

A threatened withdrawal of Libyan exports is also supporting prices, as one of the country's two competing governments declared force majeure on exports as it bids to take control of the country's central bank and oil revenue. Reuters reported production from several oilfields has been halted, but the news agency said there has been no notice of any suspension of shipments from the country's National Oil Corp.

The bullish reports are countered by weak demand from China, as the No.1 importer contends with a debt crisis for its real-estate sector, high unemployment and weaker consumer spending. Slowing economies in developed countries dealing with high interest rates and the potential return of more than two-million barrels per day of OPEC's voluntary production cuts in the fourth quarter is also weighing on prices.

"Overall, the tug-of-war between demand pessimism and supply disruptions will likely keep prices range bound for now," Saxo Bank noted.