Off The Wire
Oil eases as new lockdowns raise concern about fuel demand
NEW YORK (Reuters) - Oil prices eased on Thursday as new restrictions to stem a surge in COVID-19 infections dimmed the outlook for economic growth and fuel demand.
Traders said prices pared losses after the U.S. Energy Information Administration (EIA) reported an increase in U.S. petroleum demand last week that helped reduce crude stockpiles, while distillate inventories dropped by the most since 2003 as Hurricane Delta cut oil production and shut Gulf Coast refineries. [EIA/S]
Brent LCOc1 futures fell 23 cents, or 0.5%, to $43.09 a barrel by 1:21 p.m. EDT (1721 GMT), while U.S. crude CLc1 fell 18 cents, or 0.4%, to $40.86. Earlier, both benchmarks were down more than $1 a barrel.
“Obviously there was a major impact from the hurricane,” said Phil Flynn, senior analyst at Price Futures Group in Chicago, noting “there were some bullish overtones in the report ... like the big drop in distillates.”
In Europe, meanwhile, some countries were reviving curfews and lockdowns to fight a surge in new coronavirus cases, with Britain expected to impose tougher COVID-19 restrictions on London on Friday.
“The coronavirus surge is forcing Europe to reinstate pandemic restrictions and that is ... crippling short-term crude demand forecasts,” said Edward Moya, senior market analyst at OANDA in New York. “Anemic demand will force (OPEC+) to delay any easing of oil production cuts.”
OPEC and allies in a group called OPEC+ are due to taper production cuts in January by 2 million barrels per day (bpd), from 7.7 million bpd currently.
OPEC+ had 102% compliance with its agreement to cut oil supply in September, two OPEC+ sources told Reuters ahead of a technical committee meeting.
The group meets to set policy at the end of November and will ensure oil prices do not plunge again, OPEC’s Secretary General said, adding demand has been recovering more slowly than expected.
Top global oil traders Vitol, Trafigura and Gunvor said they saw slow oil demand recovery because of a resurgent pandemic, with prices rising to or above $50 per barrel only by October next year.
In the United States, the number of Americans filing new claims for jobless benefits rose last week to a two-month high, stoking fears of lasting damage to the labor market.
U.S. President Donald Trump said there was a chance of getting a COVID-19 stimulus package passed before the Nov. 3 presidential elections, though hopes for a deal have dimmed. On Wednesday, U.S. Treasury Secretary Steven Mnuchin said a deal was unlikely before the election.
Additional reporting by Ahmad Ghaddar in London, Sonali Paul in Melbourne and Koustav Samanta in Singapore; Editing by David Gregorio, Marguerita Choy and Kirsten Donovan