Oil flipped between gains and losses near $40 a barrel with a challenged demand outlook weighed against a potential U.S. stimulus package.
Futures in New York reversed an earlier gain to trade lower. Broader markets rallied on signs of progress for stimulus measures in the U.S. on Thursday. That followed a drop in American crude and distillate inventories in a report by the Energy Information Administration Wednesday.
Despite that support, the market is facing a steadily deteriorating demand backdrop. A 7-day moving average of worldwide commercial flights declined to the lowest since mid-August, according to Flightradar24, a website that tracks flights in real time. All the while, Europe’s oil refineries are struggling to cope with a diesel glut, limiting their prospects for extra crude buying.
West Texas Intermediate crude dipped 1.6% to $39.57 a barrel.
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After some sharp price swings in early September, crude is now back in the same range as the previous few months and, given the demand weakness, the risks look tilted to the downside. Some European governments are reimposing lockdown measures to rein in a resurgent coronavirus, while in the U.S. it’s uncertain if there will be any more fiscal stimulus before the election.
“The market is range trading,” said Giovanni Staunovo, commodity analyst at UBS Group AG. The market is “waiting to see if congress passes the fiscal stimulus.”
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There’s also downward price pressure coming from the supply side, with Libyan output being restored and Russian exports expected to increase. The North African country is now pumping around 300,000 barrels a day, up from 80,000 at the start of September. In a rare positive for oil prices, meanwhile, a strike at Norway’s biggest oil field could disrupt more than a quarter of the country’s crude production.
As the market has stabilized in recent weeks, so have speculative flows into crude. Eleven of the largest ETFs in the market together withdrew $293 million in September, according to data compiled by Bloomberg. Though that’s a fourth consecutive month of outflows, it’s also the smallest of the four.
©2020 Bloomberg L.P.
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Oil fluctuating near $40 with demand outlook still shaky - Houston Chronicle
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