By Adedapo Adesanya
Fluctuations marred the oil market on Thursday, August 6 as both major benchmarks alternated in and out of the positive territory.
As at 9 pm, the international benchmark, Brent crude futures, were up by 4 cents or 0.03 per cent at $45.18 per barrel, while the US benchmark, West Texas Intermediate (WTI) crude futures, fell 18 cents or 0.43 per cent to $42.00 per barrel.
Prices had found support to lift it to its highest point in five months previously over a weakened dollar and on the report of a large drop in crude stockpiles, but sentiment about fuel demand pressured prices.
Another boost came from news that the second largest producer of the Organisation of the Petroleum Exporting Countries (OPEC), Iraq, planned production cuts in line with its laggard status.
The OPEC member said it would make an additional cut in its oil production of about 400,000 barrels per day in August to compensate for its overproduction over the past three months under the cartel supply reduction pact.
This news lifted the market but a long term worry – demand soon nipped it due to an economic slowdown due to the coronavirus pandemic which isn’t showing signs of slowing down.
The market is also holding onto weaker American dollar as it makes dollar-priced oil cheaper for holders of other currencies. The index was up around 0.1 per cent on Thursday after falling for two sessions but stayed near two-year lows.
The dollar index, which measures the greenback against a basket of six major currencies, logged its biggest monthly percentage fall in a decade in July.
Worsening oil demand is something that investors will be looking into now as some countries implement partial lockdowns to battle the COVID-19 pandemic, prompting refiners to start planning for lower crude runs in order to prevent a problem of plenty at home.
Now that the market will see an additional 1.5 million barrels per day till December compared to what has been reduced from May through July, analysts are of the view that the market may start losing hope about expected recovery.
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