By Adedapo Adesanya
The Brent crude futures marked its lowest settlement on Thursday since July as concerns remained over the outlook for the demand of the commodity.
On Thursday, the price of the black gold was down by 36 cents or 0.81 per cent to trade at $44.07 per barrel, while the US West Texas International (WTI) crude lost 20 cents or 0.48 per cent to finish at $41.17 per barrel.
After gaining in the past few weeks, crude has faltered as the coronavirus continues to rage in many parts of the world and the demand outlook remains uncertain. Purchases by China, the world’s largest importer, are now likely to slow as smaller refineries top out their shipment quotas.
The market also reacted to unemployment data in the United States which fed fears of a slow recovery for the economy and fuel demand a day after it published weak petroleum demand data.
Data showed the number of Americans filing new claims for unemployment reached about 881,000 for the latest week. Continuing claims remained high, with millions out of work. Numbers like these are generally not encouraging to investors.
The Energy Information Administration (EIA) on Wednesday confirmed that crude inventories fell by 9.4 million barrels in the last week to 498.4 million barrels, more than what analysts expected. The data reflects a period during which Hurricane Laura shut output and refining facilities in the country.
The EIA on Wednesday also reported that petroleum supply fell by 4.3 million barrels.
Meanwhile, oil production in the Gulf of Mexico region has seen a significant recovery since the hurricane made landfall on August 27. It was reported on Thursday that an estimated 16.3 per cent of current oil production in the Gulf of Mexico was shut-in, rebounding from about 84 per cent around the time Laura reached the Gulf Coast.
Oil prices saw even steeper losses early Thursday as the US stock market sold off sharply on the heels of a tech selloff, caused by profit-taking.
In Europe, profit from making diesel on Thursday plunged to the lowest since at least 2011, signalling that demand is still weak.
On the supply front, Iraq, a regular laggard in the output curb deal between the Organisation of the Petroleum Exporting Countries (OPEC) and its allies, may seek a two-month extension to implement its compensatory cuts, indicating it won’t be able to reduce production as quickly as previously promised. That comes as other members of the club, including Saudi Arabia and Russia, are bringing some supply back in line with their agreement.
A rebound by the US dollar has also limited the gain for the commodity. Oil had previously found support as the US currency against a basket of six major rivals, fell to a more-than-two-year low earlier in the week, but it made a little recovery.
A stronger dollar can pressure commodity prices, making them more expensive to users of other currencies.
Modupe Gbadeyanka