Oil Down on Cloudy Demand Outlook - Rigzone

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(Bloomberg) -- Oil declined from a five-month high in New York with the U.S. Federal Reserve and OPEC+ sounding caution on the demand recovery as many countries struggle to contain the coronavirus.

Futures fell 1% toward $42 a barrel amid a broader rout in equities after minutes from the Fed said the pandemic would weigh heavily on economic activity, repeating its view that the recovery would depend on containment of the virus. OPEC+ also warned at a meeting Wednesday that the pace of the demand rebound was slower than expected and at risk from a prolonged second wave of the outbreak, while urging laggards to adhere to output pledges.

Oil has inched higher recently after a rally stalled in June but is struggling to push past $43 a barrel as surging infections raised doubts about a sustained recovery in consumption. Prices have also closely followed the dollar this month, with the U.S. currency strengthening after the release of the Fed minutes, making commodities such as crude less attractive for investors.

“Prices are likely reacting to the bearish Fed minutes overnight, while the OPEC+ meeting was largely within expectations,” said Howie Lee, an economist at Oversea Chinese Banking Corp. in Singapore. Oil is “expected to stay at current levels going forward as the market is working its way through a huge supply glut,” he said.

Prices

West Texas Intermediate for September delivery, which expires Thursday, fell 1% to $42.52 a barrel on the New York Mercantile Exchange after adding 0.1% on Wednesday to close at the highest level since March 5 The more-active October contract fell 0.8% to $42.75 at 7:55 a.m. London time Brent for October settlement lost 0.8% to $45.03 on the ICE Futures Europe exchange after falling 0.2% in the previous session Brent’s six-month timespread was at a contango of $2.42 a barrel, compared with $1.77 at the end of July, signaling concerns about over-supply

A big focus of the OPEC+ meeting was ensuring nations that didn’t live up to their promises in previous months make amends in August and September. Nigeria, Iraq and other laggards were given until Aug. 28 to come up with a detailed plan for their compensation cuts, according to a communique.

In a positive sign for the market, however, government data showed U.S. crude stockpiles extended declines for a fourth straight week -- the longest run this year -- while gasoline inventories dropped for a second week. Stockpiles at the storage hub of Cushing, Oklahoma, fell for the first time since June.

Other oil-market news:

Five Very Large Crude Carriers carrying a combined volume of about 9 million barrels of North Sea crude are floating off China and Singapore, according to data compiled by Bloomberg. Crude shipments exported from Saudi Arabia are seen increasing this month as OPEC+ producers ease back on their production cuts, according to tanker-tracking data compiled by Bloomberg. Malaysia’s state-owned oil company Petroliam Nasional Bhd had preliminary talks about buying Permian Basin shale driller DoublePoint Energy LLC, according to people familiar.

To contact the reporters on this story:
Sharon Cho in Singapore at ccho28@bloomberg.net;
James Thornhill in Sydney at jthornhill3@bloomberg.net

To contact the editors responsible for this story:
Serene Cheong at scheong20@bloomberg.net
Ben Sharples

© 2020 Bloomberg L.P.

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