Oil falls as demand growth concerns outweigh U.S. stock drawdown

Daniel Fowler
September 27, 2020

"Oil prices are holding up pretty well despite the lack of additional USA government stimulus", Phil Flynn, senior analyst at Price Futures Group in Chicago said, noting the market received support from this week's US oil inventory data and a rise in the stock market.

The profit from producing fuels from benchmark Dubai crude at a refinery in Singapore was 26 cents a barrel on Thursday, down from $8.03 a year earlier.

October West Texas Intermediate oil, which expired at the end of the day's session, rose 29 cents, or 0.7%, to settle at $39.60 a barrel on the New York Mercantile Exchange.

The EIA report also showed that total motor gasoline stockpiles and distillate fuel inventories fell by 4.0 million barrels and 3.4 million barrels, respectively, last week.

USA fuel demand, however, remains subdued as the pandemic limits travel.

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The jitters over demand and the economic outlook due to the coronavirus resurgence have spurred a rally in the dollar as investors turned to safer assets, adding pressure on oil prices.

Yet it was all for naught after Fed Chair Jay Powell pancaked global markets with a discordant economic warning and a penetrating call out for more stimulus to congress, both of which brought the oil price recovery to a screeching halt with nervous investors seeking out the United States dollar's safety.

ETAutoOn Wednesday, prices climbed slightly after government data showed US oil inventories fell last week. The four-week average of fuel demand was 8.5 million barrels each day (bpd) recently, the federal government information revealed, down 9% from a year previously.

In other parts of the world, daily increases of coronavirus infections are hitting records and new restrictions are being put in place that will likely limit demand for travel and fuel.

On the supply side, the market remains wary of a resumption of exports from Libya, although it is unclear how quickly it can ramp up volumes.

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