Oil falls as demand growth concerns outweigh U.S. stock drawdown
Oil prices dropped on Thursday, weighed down by concerns that U.S.
economic recovery is slowing as the coronavirus outbreak lingers, while a
renewed wave of COVID-19 cases in Europe have led to reimposed travel
restrictions in several countries.
The jitters over demand and
economic outlook due to the coronavirus resurgence have prompted a rally
in the dollar as investors turned to safer assets, adding pressure to
oil prices. A stronger dollar makes oil, priced in U.S. dollars, less
attractive to global buyers.
U.S. West Texas Intermediate (WTI)
crude (CLc1) futures fell 60 cents, or 1.5%, to $39.33 a barrel at 0445
GMT, while Brent crude (LCOc1) futures dropped 47 cents, or 1.1%, to
$41.30 a barrel.
Both benchmarks climbed slightly on Wednesday
after government data showed U.S. crude and fuel stockpiles dropped last
week. Gasoline inventories fell more than expected, sliding by 4
million barrels, and distillate stockpiles posted a surprise drawdown of
3.4 million barrels.
Still, fuel demand in the U.S. remains
subdued as the 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 U.S. business activity slowed in September, U.S.
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.
"Oil
prices are wilting as product for immediate delivery remains
plentiful," said Jeffrey Halley, a senior market analyst at OANDA.
"Consumption
outlook concerns are rising as COVID-19 restrictions return in Europe,
and the clamour from the Federal Reserve for more U.S. fiscal stimulus,
undermines the global recovery case, the lynchpin for oil's price
recovery."
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," said Commonwealth Bank
commodities analyst Vivek Dhar.
Source : investing.com