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Oil falls on fuel demand growth concerns as coronavirus lingers

  • Published at 09:40 am September 24th, 2020
US Crude oil
File photo: The sun sets behind a crude oil pump jack on a drill pad in the Permian Basin in Loving County, Texas, US November 24, 2019 Reuters

Prices turned down after data showed US business activity slowed in September

Oil futures fell on Thursday on concerns the economic recovery in the United States, the world’s biggest oil consumer, is slowing as the coronavirus outbreak lingers and a resurgence in European cases led to new travel restrictions there.

Those fears prompted a rally in the dollar as investors turned to safer assets, adding pressure to oil prices. A stronger dollar makes oil, priced in US dollars, less attractive to global buyers.

US West Texas Intermediate (WTI) crude CLc1 futures fell 36 cents, or 0.9%, to $39.57 a barrel at 0217 GMT, while Brent crude LCOc1 futures fell 28 cents, or 0.7%, to $41.49 a barrel.

Both benchmarks climbed slightly on Wednesday after government data showed US crude and fuel stockpiles dropped last week. Gasoline inventories fell more than expected, sliding by 4 million barrels, and distillate stockpiles, which include diesel and jet fuel, posted a surprise drawdown of 3.4 million barrels.

Also read: Oil prices slip on potential Libyan oil return; Gulf storm supports

Still, fuel demand in the US remains subdued as the coronavirus pandemic limits travel. The four-week average of gasoline demand was 8.5 million barrels per day (bpd) last week, the government data showed, down 9% from a year earlier.

Prices turned down after data showed US business activity slowed in September, US Federal Reserve officials flagged concerns about a stalling recovery, and Britain and Germany imposed restrictions to stem new coronavirus infections - all factors affecting the fuel demand outlook.

“As those demand concerns and comments from the Fed filtered through, prices fell,” said Commonwealth Bank commodities analyst Vivek Dhar.

On the supply side, the market remains wary of a resumption of exports from Libya, although it is unclear how quickly it can ramp up volumes. Libya’s National Oil Corp (NOC) seeks to boost output to 260,000 bpd by next week.

“That clearly is going to be something the oil market doesn’t need right now,” Dhar said.

ANZ Research pointed to rising coronavirus cases in Europe cutting travel demand, with air traffic now 60% below 2019 levels following a sharp drop over the past two weeks, according to Euro control data.

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