Oil prices fell in energy commodities on Thursday. The industry is being weighed down by concerns that U.S. economic recovery is slowing.
A renewed wave of COVID-19 cases in Europe has led to reimposed travel restrictions in several countries.
Worries over demand and economic outlook due to the resurgence of COVID-19 have prompted a rally in the dollar. Investors have turned to safer assets, thus adding pressure to oil prices. The stronger greenback makes oil which is priced in U.S. dollars, less attractive to global buyers.
U.S. West Texas Intermediate crude futures dropped 37 cents, or 0.9%, to $39.56 a barrel. Brent crude futures fell 34 cents, or 0.8%, to $41.43 a barrel.
On Wednesday, both benchmarks climbed slightly after U.S. crude and fuel stockpiles dropped last week based on government data.
Gasoline inventories have declined more than expected, sliding by 4 million barrels. Posting a surprise drawdown of 3.4 million barrels were distillate stockpiles.
Still, with the new travel restrictions, fuel demand in the U.S. remains subdued. The four-week average of gasoline demand was 8.5 million bpd last week. Government data showed this 9% decline from a year earlier.
Oil: Fuel Demand Outlook
Data showed U.S. business activity slowed in September, thus prices turned down. Concerns about a stalling recovery were flagged by the U.S. Federal Reserve officials. In addition, Britain and Germany imposed restrictions to stem new coronavirus infections.
Apparently all of these factors affected the fuel demand outlook.
Jeffrey Halley, a senior market analyst at OANDA said, oil prices are wilting as products for immediate delivery remains plentiful.
Furthermore, Halley said consumption outlook concerns are rising as COVID-19 restrictions return in Europe. The clamour for more U.S. fiscal stimulus, Halley said, undermines the global recovery case, the lynchpin for oil’s price recovery.
On supplies, the market remains cautious of a resumption of exports from Libya. Although it is not clear how fast it can ramp up volumes.
Commonwealth Bank commodities analyst Vivek Dhar said, that’s clearly going to be something the oil market doesn’t need right now.
Meanwhile, commodity news reports Iraq’s oil minister Ihsan Abdul Jabbar expects an agreement with the OPEC+ group. This is to increase the country’s crude oil exports.
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