Oil on track for biggest weekly drop since June amid lacklustre demand

 Oil on track for biggest weekly drop since June amid lacklustre demand
imageCommodities16 hours ago (Sep 04, 2020 02:50AM ET)

(C) Reuters. FILE PHOTO: The sun sets behind a crude oil pump jack on a drill pad in the Permian Basin in Loving County

By Florence Tan

SINGAPORE (Reuters) – Oil futures dropped on Friday, with prices on both sides of the Atlantic heading for their biggest weekly declines since June, as lacklustre demand and ample fuel supplies offset support from a weaker dollar.

Brent crude (LCOc1) fell 33 cents, or, 0.8% to $43.74 a barrel by 0630 GMT. The international benchmark contract has fallen 2.9% so far this week.

U.S. West Texas Intermediate (WTI) crude (CLc1) futures were down 35 cents or, 0.9% to $41.02 a barrel, and set for the first weekly drop in five weeks.

“Both contracts look precarious now and will be relying on robust (U.S.) non-farm payroll data this evening to salvage them,” said Jeffrey Halley, a senior market analyst at OANDA.

“Abundant spot supplies and a nervous equity market will continue to erode confidence.”

The volume of crude arriving in China, the world’s largest crude importer, is set to slow in September after rising for five straight months as its refiners gradually digest bloated inventories, according to data on Refinitiv Eikon.

In the United States, refiners awash in diesel inventory are unlikely to boost output soon.

“Soft margins are likely to cap further crude rallies and we anticipate further run cuts this fall to expedite the rebalancing of product stocks,” RBC Capital analyst Mike Tran said in a note.

Production cuts led U.S. gasoline inventories to fall at a “manic” pace in the past two months, even though U.S. mobility indicators suggest that driving patterns have largely plateaued over the past 6-8 weeks, he added.

Middle distillates inventories at Asia’s oil hub Singapore have also soared above a nine-year high.

FGE analysts said rising coronavirus cases worldwide and renewed lockdowns would dash hopes of a drawdown in oil stocks for some time. The pressure remains on refiners to keep operating rates low, FGE said.

Oil on track for biggest weekly drop since June amid lacklustre demand

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