Oil Prices Down On Demand Worries

by Ship & Bunker News Team
Wednesday October 7, 2020

Doubt over the White House being able to reach a deal on further Covid-19 financial aid was cited as a key factor in crude prices on Wednesday falling nearly 2 percent, further exacerbated by a slightly larger than expected build in U.S. crude inventories.

But as has become the norm, the negatives outweighed some more positive aspects of the two widely-reported news items.

Shortly after White House Chief of Staff Mark Meadows said he was not optimistic about another stimulus package being released, Brent fell 66 cents to settle at $41.99 per barrel, while West Texas Intermediate fell 72 cents to settle at $39.95 per barrel.

Harry Tchilinguirian, head of commodities research at BNP Paribas, remarked, “Trump pulling out of relief negotiations generates a lot of uncertainty about the economy.”

However, Trump has only postponed the negotiations until after the November elections and wants to take a more piecemeal approach to disseminating financial aid.

Traders were further disheartened by government data showing that crude inventories rose 501,000 barrels last week compared with analysts' expectations for a 294,000-barrel rise. However, gasoline stocks fell by 1.4 million barrels in the week compared with expectations for a 471,000-barrel drop, and distillate stockpiles dropping by 962,000 barrels.

John Kilduff, founding partner at Again Capital, commented that “We are seeing solid improvement in the refined product demand front.”

But investors' overall lack of faith in economic recovery was illustrated by John Kemp, commodities analyst for Reuters, who noted that "Hedge funds sold the equivalent of 29 million barrels in the six most important petroleum futures and options contracts, largely reversing purchases of 40 million barrels the week before."

He added, "The prospect the resurgent epidemic will disrupt most of the major economies and international travel for at least another six months is weighing heavily on prices."

That said, there was news yesterday that Saudi Arabia raised November pricing slightly for its flagship crude oil to Asia - a clear sign of strength in the current physical market.