US oil futures dip below $80 as demand slows in oversupplied market

Oil futures fell below $80 a barrel, extending a sharp weekly decline, as the global crude market softens amid signs of an oversupplied market. 

Pullbacks were evident along most of the oil-trading complex. On Friday, the US prompt-spread flipped into contango, a structure that signals oversupply, for the first time since last year. Meanwhile, a deteriorating market for physical barrels has also weighed on prices, as demand for winter-delivery cargoes has weakened. 

Oil futures are trading at their lowest level since September amid swelling Covid-19 cases in China and aggressive monetary tightening by central banks. West Texas Intermediate shed as much as 5.4% to trade near $77 a barrel, down almost 12% this week.

Crude is trading below several key moving averages, sparking so-called technical-based selling, against a backdrop of elevated speculative long positions. A further collapse in the market’s structure on Friday has added to the selling.

“There’s a lot of confusion in this market right now,” Amrita Sen, chief oil analyst at consultant Energy Aspects said in a Bloomberg TV interview. “Yes, demand in China is weak and this is something we’ve been saying for some time. 

“The thing is, the rest of the world demand is actually pretty decent,” she added.

Coronavirus cases in China have climbed to near their highest level of the pandemic, as authorities signal they’re preparing for even more infections. The increases will likely prove a test for any loosening of the country’s Covid-19 rules. 

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Bloomberg