Oil falls more than 5% on demand concerns and Saudi cuts
Traders eye demand destruction and a bleaker macroeconomic outlook
Oil prices settled down more than $5 on Wednesday as fuel demand destruction and a bleaker macroeconomic picture took centre stage in the day’s trade.
Brent crude oil futures settled down $5.11, or 5.6%, to $85.81 a barrel while US West Texas Intermediate crude (WTI) fell $5.01, or 5.6%, to $84.22.
At their session lows, both benchmarks were down by more than $5, and heating oil and petrol futures also fell by more than 5%. Crude oil prices have fallen by about $10 since last week’s settlement.
Finished petrol supplied, a proxy for demand, fell last week to about 8-million barrels per day (bpd), its lowest since the start of this year, the US Energy Information Administration (EIA) reported Wednesday.
Some of that demand destruction could be due to torrential rains which brought flooding to New York last Friday and post-tropical storm Ophelia, which doused the northeast with torrential downpours in late September, said Bob Yawger, director of energy futures at Mizuho.
Seasonally, US fuel consumption is at the lowest level in 22 years, according to commodity analysts at JPMorgan.
A 30% spike in fuel prices in the third quarter of this year depressed demand, resulting in a counter seasonal plunge of 223,000 barrels per day, the analysts wrote in a Wednesday note.
Fuel stocks rose by 6.5-million barrels, far exceeding expectations of a 200,000-barrel rise.
US nationwide crude stocks fell by 2.2-million bpd to 414.1-million bpd in the week to September 29, but stocks at Cushing, Oklahoma, the WTI delivery hub, rose for the first time in eight weeks.
Saudi Arabia’s energy ministry confirmed it will continue its voluntary 1-million bpd crude supply cut until year end, while Russia said it will continue its 300,000 bpd crude export cuts, and in November will review its voluntary 500,000 bpd output cut set in April.
Economic news also pressured oil prices. Growth in the US services sector slowed in September, data showed.
The daily Kommersant reported that Russia could be ready to ease its diesel ban in coming days, citing unidentified sources.
The oil cartel Opec+ joint ministerial monitoring committee online meeting kept the group’s output policy unchanged.
Oil markets are heading in the “right direction” by balancing supply and demand, Kuwait's oil minister Saad Al Barrak said, according to state media agency KUNA.
Russian deputy prime minister Alexander Novak said the Saudi and Russian cuts have helped to balance oil markets, and said the domestic market benefited from the Kremlin's diesel and gasoline export ban.
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