Oil Drops After Warnings on U.S. Economy and Global Crude Demand

© Reuters.

(Bloomberg) — Oil dropped toward $39 a barrel in Asian trading — even after a decline in American crude and fuel stockpiles — following warnings over global energy demand and the state of the U.S. economy.

Futures in New York fell 1.4% after rising for a second day on Wednesday. Federal Reserve officials stressed that more fiscal stimulus is critical to sustain the U.S. economic recovery, while the head of commodities trader Mercuria Energy Group said that global oil markets won’t be able to absorb OPEC+ production increases as demand remains weaker than expected.

That was after the market found support on Wednesday from Energy Information Administration data showing U.S. distillates inventories fell the most since March, while crude inventories dropped for a second week.

After trading above $43 a barrel in late August, oil has lurched lower this month amid signs a resurgence in the coronavirus could lead to more lockdown measures. The OPEC+ alliance, meanwhile, is slowly tapering its production cuts and Libya is unleashing fresh supply as its civil war abates.

See also: Return of Libya’s Oil Is a New Headache for Markets

“The warning from Fed officials certainly weighed on U.S. equities and took oil lower with it,” said Warren Patterson, head of commodities strategy at ING Bank NV. Economic uncertainty and the recent pickup in Covid-19 cases will keep oil from moving too much higher in the next two weeks and it’s likely to remain in a fairly narrow range, he said.

Brent’s three-month timespread was steady at $1.26 a barrel in contango — where prompt contracts are cheaper than later-dated ones — compared with $1.37 at the beginning of the week. The market structure indicates that while there’s still concern about over-supply, it’s eased a bit.

READ  Public Credit Registry to catalyse MSMEs’ financial inclusion: Enkash

Oil stockpiles have been building in September and won’t draw down enough in the remainder of the year to be in balance if OPEC+ follows through with its plan to taper production cuts early next year, Mercuria Chief Executive Marco Dunand said in an interview. Democrats and Republicans, meanwhile, have been at loggerheads over another virus relief package, with no formal negotiations since early August, even as Fed officials call for more fiscal support.

stockpiles fell by 0.3% to 494.4 million barrels in the week through Sept. 18 and distillates inventories dropped 1.9% to 175.9 million barrels, the EIA data showed. U.S. oil producers say they’re still prioritizing keeping output flat over reducing debt, according to the latest energy survey published by the Federal Reserve Bank of Dallas.

©2020 Bloomberg L.P.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

READ  UK jobless figures climbing but most dangerous moment may have passed



Please enter your comment!
Please enter your name here