Brent Drops Below $90 on Expected Weak Demand

By Adedapo Adesanya

The Brent crude futures fell below $90 a barrel on Thursday in volatile trade on multiple signals warning of weaker demand in the coming months despite a large drop in US crude inventories, losing 68 cents or 0.8 per cent to finish at $89.92.

Also, the US West Texas Intermediate (WTI) crude futures went down yesterday by 67 cents or 0.8 per cent to settle at $86.67 per barrel.

Prices had spiked earlier in the week after Saudi Arabia and Russia, the world’s top two oil exporters, extended voluntary supply cuts to the year-end.

The plans to curb global oil supply by a combined 1.3 million barrels daily is one of the major reasons why the oil market is trading around the $80 – $90 mark.

These were on top of the April cuts agreed by several producers under the aegis of the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) running to the end of 2024.

Now, there are expectations that jet fuel demand will ease as the summer travel period comes to an end, alongside continued concerns over China’s uncertain economic outlook.

Concerns about rising oil output from Iran and Venezuela, which could balance out a portion of cuts from Saudi and Russia, also kept a lid on the market as well.

There was further pressure as the US Dollar gained, pushing the Yen to a 10-month low and driving the Euro and Pound Sterling to their weakest levels in three months, as investors placed their bets on a strong US economy.

A stronger Dollar boosts the cost of greenback-denominated oil purchases for holders of other currencies.

These outweighed support that came as the US Energy Information Administration (EIA) reported an inventory draw of 6.3 million barrels for the week to September 1, in contrast to a massive decline of 10.6 million barrels for the previous week, which brought inventories to the lowest in eight months.

Market participants also digested mixed data from China which showed that overall exports fell 8.8 per cent in August year on year and imports contracted 7.3 per cent but crude imports surged 30.9 per cent.