Slump in demand keeps oil at multi-week lows

Singapore/Melbourne — Oil prices edged up on Thursday, but held near multi-week lows hit overnight after US data showed gasoline demand fell and recovery from the Covid-19 pandemic was lagging.

US West Texas Intermediate (WTI) crude futures were up 9 US cents, or 0.22%, at $41.60 a barrel by 3.49am GMT. Brent crude edged up 2c, or 0.05%, to $44.45 a barrel.

Both benchmarks fell more than 2% on Wednesday, with WTI sliding to its lowest close in nearly four weeks and Brent at its weakest since August 21.

US gasoline demand last week fell to 8.78-million barrels per day (bpd) from 9.16-million bpd a week earlier.

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 was lagging.

Analysts warn that the upcoming refinery maintenance and the end of 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.

“This is compounded by weak refining margins, which are their lowest in nearly a decade for this time of the year.”

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

“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.

Commonwealth Bank (CBA) forecasts Brent will average $46 in the fourth quarter before rising to $55 by the end of 2021.

“There is enough spare oil capacity and enough pressure on demand growth to justify only a gradual increase in oil prices over the next 12 months,” CBA commodities analyst Vivek Dhar said in a note.

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

Opec and allies, a grouping known as Opec+, is cutting output by 7.7-million bpd until December to support prices as the coronavirus crisis hammers demand.