Oil slips as traders fret about demand

Tokyo — Oil prices eased on Wednesday on the concern that US fuel demand may not recover as quickly as expected amid stalled talks on an economic stimulus package, overshadowing a bigger-than-expected drawdown in US crude stocks.

With investors keeping one eye on a key producer countries’ ministerial meeting later in the day, Brent crude futures fell 33c, or 0.7%, to $45.13 a barrel by 4.18am GMT, having edged up 9c on Tuesday.

US West Texas Intermediate (WTI) crude futures were down 21c, or 0.5%, at $42.68 a barrel, having ended unchanged the previous day.

“Demand concerns weighed on oil prices, with US economic stimulus still nowhere in sight and US-Sino trade talks being postponed,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.

US President Donald Trump on Tuesday said he postponed trade talks with China, adding that he does not want to talk to China right now.

“But losses were limited by positive news such as a drop in US crude stocks,” Kikukawa said, predicting prices will stay within a tight range amid the mixed signals.

On the positive side, US crude inventories fell by 4.3-million barrels to about 512-million barrels, more than analysts’ expectations for a 2.7 million-barrel drawdown, while petrol stocks rose, industry data from the American Petroleum Institute showed after the markets closed on Tuesday.

Oil also gave ground due to the disconcerting increase in petrol inventories, said Stephen Innes, chief global market strategist at AxiCorp.

“It’s challenging to make heads or tails out of the oil market these days,” he said in a note. “The market is struggling to make new highs as demand concerns remain tethered to the hip of the coronavirus worries as Opec returns more barrels to market this month.”

Investors are keenly awaiting news from Wednesday’s meeting of a ministerial panel of Opec and allies including Russia, a grouping known as Opec-plus, which is set to review adherence to a previously agreed deal on oil output cuts.

Compliance with the cuts stood at 95%-97% in July, according to Opec-plus sources and a draft report reviewed by Reuters on Monday.

Russian energy minister Alexander Novak is set to join the video meeting despite having tested positive for the novel coronavirus.

Opec-plus eased their cuts in August to 7.7-million barrels a day from 9.7-million barrels a day previously.

Reuters