Oil down to new low as petrol demand is weak

London — Oil prices extended losses on Thursday, falling to their lowest point since early August, as worries about weaker US petrol demand and a sluggish economic recovery from the Covid-19 pandemic dented sentiment.

Brent crude fell 79c, or 1.8%, to $43.64 a barrel by 8.45am GMT. US West Texas Intermediate (WTI) crude futures were down 67c, or 1.6%, at $40.84 a barrel.

Both benchmarks fell more than 2% on Wednesday.

US petrol demand last week fell to 8.78-million barrels per day (bpd) from 9.16-million bpd a week earlier, Energy Information Administration (EIA) data showed on Wednesday, with consumption of other oil products also falling.

“It is the latest data set that possibly caught the eye of those who ran long positions, and not even another record close in the US stock market was able to change the direction of the herd,” Tamas Varga of oil brokerage PVM said.

Other data, such as US private employers hiring fewer workers than expected for a second straight month in August, also fed fears that economic recovery is lagging.

Oil markets, however, drew some support from Iraq’s denial it was seeking exemption from oil cartel Opec and its allies (Opec+) oil cuts during the first quarter of next year.

Opec’s second largest producer also said it may seek to extend the period for making additional compensation cuts under the Opec+ deal by two months until the end of November.

Analysts warn that the upcoming refinery maintenance and the end of the summer driving season would also limit crude demand.

WTI crude has come under pressure “after US refiners earmarked a long list of maintenance closures over the coming months that will no doubt impact demand for crude oil”, ANZ Research said in a note on Thursday.

Due to shutdowns ahead of Hurricane Laura, US refinery utilisation rates fell by 5.3 percentage points to 76.7% of total capacity, the EIA said.

“These factors suggest a seasonal drop-off in refinery runs and higher oil inventory levels as we advance through September,” AxiCorp market strategist Stephen Innes said. 

Reuters