Economic news

Oil Falls, Demand Concerns Set Prices up for Loss on Week

Oil futures lost ground Friday, prompting prices to turn lower for the week, as an accelerating rise in COVID-19 cases in the U.S. and Europe heightens worries about demand for crude.

West Texas Intermediate crude for November delivery fell 58 cents, or 1.4%, to $40.38 a barrel on the New York Mercantile Exchange, positioning prices for a weekly loss of 0.6%, based on the front month.

December Brent crude, the global benchmark, was off 67 cents, or 1.6%, to $42.49 a barrel on ICE Futures Europe. Brent was on track for a 0.8% weekly decline.

“The market is worried about how the increasing lockdown measures in Europe will affect demand,” said Marshall Gittler, head of investment research at BDSwiss Group, in a note. “Mobility data suggests that travel has only recovered to 60% of its pre-pandemic levels in Europe, and it’s about to get a new hit as several European countries restrict gatherings again.”

Over in the U.S., data released Friday revealed that industrial production fell for the first time in five moves, down 0.6% in September, surprising economists who expected more steady growth.

“The not-too distant memory of negative oil prices still sting traders across the space as the threat of another supply chain crunch would rise exponentially with expectations of new lockdown measures being imposed in the U.S.,” analysts wrote in the latest newsletter from Sevens Report Research. Still, “more widespread lockdowns do remain rather unlikely,” they said.

Oil prices, however, did find some support during the week after Saudi Arabia and Russia reported reiterated their commitment to the production cut agreement between the Organization of the Petroleum Exporting Countries and their allies, together known as OPEC+.

That raised expectations that “the alliance might take further action to either address some of its members’ undercompliance or re-evaluate its plan to boost production again from January,” said Paola Rodriguez-Masiu, senior oil markets analyst at Rystad Energy. “If these hopes prove futile then prices may be in danger again next week after the OPEC+ meeting.”

The Joint OPEC-Non-OPEC Ministerial Monitoring Committee, or JMMC, which monitors compliance with production cuts, is scheduled to meet on Monday.

“We expect on Monday’s meeting some strong words on compensating for the undercompliance” by some oil producers, said Rodriguez-Masui. “What everybody is wondering is if there will be any action against the laggards this time or if the bashing will stay at a verbal level.”

Oil fell sharply during Wednesday’s session, but ended the day with small losses. Crude bounced after a round of weekly inventory data from the Energy Information Administration that showed a larger-than-expected fall in U.S. crude supplies, as well as a declines in gasoline inventories and a much larger than expected drop in distillate stocks.

On Nymex Friday, November gasoline traded at $1.1467 a gallon, down 2.8%, with front-month prices looking at a weekly loss of around 4.6%, while November heating oil lost 1.9% to $1.1661 a gallon, trading over 2% lower for the week.

November natural gas tacked on 0.7% to $2.793 per million British thermal units, looking at a weekly rise of 1.9%. The EIA on Thursday reported a smaller-than-expected weekly climb in U.S. natural-gas supplies.

Source: Marketwatch

To leave a comment you must or Join us

More news

Back to economic news list

By visiting our website and services, you agree to the conditions of use of cookies. Learn more
I agree