Oil Drops Over Continuous Fuel Demand Worries

Both Brent and WTI futures were below the $70-mark, following slumping higher than 5% over the preceding six assemblies. They traded near their weakest level after May 24 during the previous session.

Craig Erlam, the senior market analyst at OANDA Europe, said in a note that crude prices proceed to look weak around those mid to late summer support levels, $65 in WTI and $67 in Brent.

Oil became hammered hard by weakening demand in China, the first oil importer globally, as restrictive measures to control the country’s latest coronavirus outbreak remain in place.

A shock build exacerbated worries over slower fuel demand in U.S. gasoline inventories. U.S. Energy Information Administration (EIA) data recorded a 696,000-barrel figure in gasoline supplies. According to Investing.com judgments, 1.671 million barrels were drawn. Meanwhile, a 1.4-million-barrel draw became recorded throughout the previous week.

The EIA data also revealed a 3.234-million-barrel draw in U.S. crude oil quantities in the week to Aug. 13. According to some prognostications, there is a 1.055-million-barrel draw. Meanwhile, a 447,000-barrel draw became reported throughout the preceding week.

Crude oil data from the American Petroleum Institute published the day before bestowed a draw of 1.163 million barrels.

China’s output and retail sales increase

In July, China’s factory production and retail sales increase also decreased distinctly and missed expectations. Particularly, as new coronavirus Delta variant outbreaks and floods disturbed businesses.

Hedge funds traded petroleum last week for the sixth consecutive time in eight weeks. This occurred as resurgent Covid-19 Delta variant infections in China, Europe, and North America discouraged hopes of a speedy resumption in long-distance air travel.

Japan was estimated to spread its state of emergency in Tokyo and other areas to Sept. 12 and extend curbs to seven more prefectures.

On the supply side, according to government data, U.S. shale oil production anticipated growth to 8.1 million barrels per day (bpd) in September. This is the most distinguished growth following May 2020.

Last week, U.S. President Joe Biden’s administration pushed OPEC+, which groups members of the Organization of the Petroleum Exporting Countries and other producers such as Russia, to increase oil production to stop increasing gasoline prices.

But four sources informed Reuters that the group considers oil markets do not require more crude oil than they intend to release in the following months.