Oil prices fall as fuel demand drops and on oversupply concern

London — Oil prices fell on Thursday on demand concerns driven by cautious views from oil cartel Opec and its allies (Opec+) and the US Federal Reserve regarding economic recovery from the coronavirus pandemic.

Brent crude was down 44c, or 1%, at $44.93 a barrel at 8.26am GMT, and West Texas Intermediate (WTI) US oil fell 44c, or 1%, at $42.49 a barrel.

“The surge in Covid-19 infections over the summer has muted the recovery and anyone still believing in a V-shaped recovery needs to do some reassessment,” said Hussein Sayed, chief market strategist at FXTM,

Opec+ said on Wednesday that the pace of oil market recovery appeared to be slower than anticipated with growing risks of a prolonged second wave of the pandemic. The group pressed oil nations pumping above output targets to cut more in August and September due to concerns about the strength of recovery in demand.

Prices were also pressured after several US Fed members said additional monetary policy easing may be needed because a rebound in employment is already slowing.

“All roads in global and regional economies lead to the containment of the virus and the end of these roads is not in sight yet,” said oil broker PVM’s Tamas Varga.

The US Energy Information Administration (EIA) said on Wednesday that US fuel demand fell by more than 2-million barrels per day (bpd) to 17.2-million bpd in terms of product supplied.

Overall fuel demand in the past four weeks is down 14% from levels a year ago. As the summer driving season comes to a close, fuel demand tends to decline.

However, stockpiles of crude in the US fell for a fourth straight week, even as net imports rose, the EIA said.

Reuters