Oil prices extend around 5% drop amid hopes for Libyan export resolution and demand concerns

Both contracts fell to their lowest since December on signs of a deal to resolve the political dispute between rival factions in Libya that cut output by about half and curbed exports.

Oil prices fell on Wednesday, extending the previous day's more than 4% plunge, on expectations the political dispute that has halted Libyan exports may be resolved and concerns over lower global demand growth.

Brent crude futures for November fell 28 cents, or 0.4%, to $73.47 at 0052 GMT after dropping 4.9% in the previous session. U.S. West Texas Intermediate crude futures for October were down 31 cents, or 0.4%, to $70.03 after dropping 4.4% on Tuesday.

Both contracts fell to their lowest since December on signs of a deal to resolve the political dispute between rival factions in Libya that cut output by about half and curbed exports.

"Selling continued in Asia amid expectations of a potential deal to resolve the dispute in Libya," said Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd.

"The market remained under pressure also because of concerns over sluggish fuel demand following weak economic indicators from China and the United States," he said.

Libya's two legislative bodies agreed on Tuesday to jointly appoint a central bank governor, potentially defusing the battle for control of the country's oil revenue that started the current dispute.

Libyan oil exports at major ports were halted on Monday and production curtailed across the country. Libya's National Oil Corp (NOC) declared force majeure on its El Feel oilfield from Sept. 2.

Market sentiment also weakened after Institute for Supply Management data on Tuesday showed U.S. manufacturing remained subdued despite a modest improvement in August from an eight-month low in July.

In China, the world's biggest crude importer, recent data showed that manufacturing activity sank to a six-month low in August and growth in new home prices slowed in August.

Weekly U.S. inventory data has been delayed by Monday's Labor Day holiday. The report from the American Petroleum Institute will be due at 4:30 p.m. EDT (2030 GMT) on Wednesday and the Energy Information Administration will be published at 11:00 a.m. EDT (1500 GMT) on Thursday.

U.S. crude oil and gasoline stockpiles were expected to have fallen last week, while distillate inventories likely rose, a preliminary Reuters poll showed on Tuesday.