Oil retreated on renewed concerns over demand as some of the world’s biggest traders warned that a recovery is still some way off as the pandemic continues to cast a shadow over the market.
US benchmark crude futures fall as much as 2.2%. Global confirmed deaths from the coronavirus — which has eviscerated energy demand — topped 1 million. Meanwhile, three of the world’s biggest independent oil traders said consumption won’t meaningfully recover for at least another 18 months and Total SE said demand growth will end around 2030.
“Sentiment is suffering from the uncertainties related to Covid-19,” said Harry Tchilinguirian, head of commodities strategy at BNP Paribas SA. “The first is uncertainty around the implementation of new, or the continuation of existing, fiscal measures to support the economy. The second is related to the re-introduction of stricter guidance, notably in Europe, to stem the tide of a
second wave of outbreaks.”
The market is contending with an increase in supply from Opec+ members including Libya, as Russia likely exceeded its Opec+ quota. US inventory data on Wednesday will give an updated outlook on consumption. Crude stockpiles are seen higher week-on-week and gasoline lower, a Bloomberg survey shows. Oil closed at the highest in more than a week on September 28.
“Despite the impressive rally in risk assets, investors will find it premature to become upbeat,” said PVM Oil Associates analyst Tamas Varga. Actual “demand data will probably bear more relevance” than the US stockpile figures, he said.
US gasoline stockpiles shrink by 1.2 million barrels last week for an eighth weekly draw, according to the Bloomberg survey.
Refiners are being forced into a balancing act due to the uneven rebound in fuel consumption. In India, processors are importing gasoline to cover demand as plants run below capacity, while in the US, refiners have idled some units to deal with excess diesel supply.