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Oil prices fall again; demand worries outweigh tight supply

by Jessica Weisman-Pitts
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2023 10 05T004815Z 2 LYNXMPEJ9400H RTROPTP 4 GLOBAL OIL SAUDI

Oil prices fall again; demand worries outweigh tight supply

By Arathy Somasekhar

HOUSTON (Reuters) -Oil prices fell about 2% on Thursday, extending the previous session’s nearly 6% losses, as an uncertain demand outlook overshadowed an OPEC+ decision to maintain oil output cuts, keeping supply tight.

Global benchmark Brent crude futures have declined about $10 a barrel in less than 10 days after edging close to $100 in late September.

The combined percentage drop over the last two days was the steepest since May for both crude benchmarks.

Brent futures fell $1.62, or 1.9%, to $84.19 by 12:09 p.m. ET (1609 GMT). U.S. West Texas Intermediate crude futures were $1.55 cents, or 1.8%, lower at $82.73.

“This is typical speculative trading activity – trying to make the best out of a bad situation after the bloodbath on Wednesday, and they (market participants) are trying to pick the bottom,” said Bob Yawger, director of energy futures at Mizuho.

Oil settled more than $5 lower on Wednesday – its biggest daily drop in over a year even after a meeting of a ministerial panel of OPEC+, the Organization of the Petroleum Exporting Countries and allies led by Russia.

It made no changes to the group’s oil output policy, and Saudi Arabia said it would maintain a voluntary cut of 1 million barrels per day (bpd) until the end of 2023, while Russia would keep a 300,000 bpd voluntary export curb until the end of December.

However, investors were worried that peak demand for fuel consumption is behind us, said Dennis Kissler, senior vice president of trading at BOK Financial, adding that hedge fund liquidated heavily on fears that higher interest rates with inflation would sap fuel demand.

“The market is searching for an equilibrium,” Kissler said.

The Kremlin also said there was no deadline on lifting a ban on fuel exports to fight high local gasoline and diesel prices.

“We continue to see the market in deficit through the fourth quarter and the softer prices reduce the probability OPEC will ease supply constraints,” National Australia Bank analysts said.

Government data on Wednesday also showed a sharp decline in U.S. gasoline demand. Finished motor gasoline supplied, a proxy for demand, fell last week to its lowest since the start of this year.

Other data on Wednesday showed the U.S. services sector slowed while the euro zone economy probably shrank last quarter, according to a survey.

On Thursday, the Turkish energy minister said a crude oil pipeline from Iraq through Turkey, which has been suspended for about six months, was ready for operations.

(Reporting by Arathy Somasekhar in Houston, Paul Carsten in London, Katya Golubkova in Tokyo and Jeslyn Lerh in Singapore; Editing by Marguerita Choy and David Gregorio)