Oil Marks Another Weekly Drop over Worrisome Demand

By Adedapo Adesanya

Oil futures suffered a second consecutive weekly decline on Friday, pressured by worries over the outlook for demand and a climb in US crude supplies.

The international benchmark, Brent crude, dropped 24 cents or 0.6 per cent to sell at $39.82 per barrel, while the US West Texas Intermediate (WTI) crude lost 16 cents or 0.39 per cent to settle at $37.33 per barrel.

Growing infection rates around the world continue to spell demand worries for the oil market as one of the world’s largest consumer of oil, India, reported another record daily jump in its COVID-19 cases.

Globally, cases crossed 28.6 million on Friday and investors expect a global glut to persist if demand weakens further with the rising coronavirus cases in some countries.

Crude had posted a loss on Thursday as investors focused on government data that showed a 2 million-barrel climb in US crude inventories for the week ended September 4, according to the Energy Information Administration (EIA).

The uncertainty heightened worries over near-term domestic demand in the largest oil-consuming nation while it also lingers over the outlook for global demand.

The rise in crude stockpiles rose against expectations as refineries slowly returned to operations after production sites were shut down due to storms in the Gulf of Mexico and the wider region last week.

The news that traders were starting to book tankers again to store crude oil and diesel, amid a stalled economic recovery, also dampened the mood of the market.

Increasing stockpiles are likely to be a subject at a meeting on September 17 of the market monitoring panel of the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia.

The OPEC and allied producers also known as OPEC+ decided to taper production cuts by 2 million barrels per day to 7.7 million barrels per day beginning August 1 through the end of the year.

However, Saudi Arabia and Kuwait have lowered their official selling prices to Asia for October, to counter slower demand. Reduction of prices does not bode well with investors who see the move as highly risky.

OPEC officials had seen production increases justified as demand gradually returned from its pandemic’s nadir in April but the meeting on Thursday may touch on the new development.

Data from Baker Hughes BKR Friday, meanwhile, showed a modest decline of 1 in the number of active US rigs drilling for oil to total 180.