Oil Prices Slip as Coronavirus Case Surge Dents Fuel Demand Hopes

Headache for OPEC as oil market structure signals return of glut

The September Brent contract, which is expiring on Friday, was unchanged at $43.75 a barrel in light trading. US West Texas Intermediate crude futures CLc1 gained $0.47, or 1.2%, to $41.51 a barrel.

Inventories of crude oil in the USA dropped by 6.8 million barrels last week to 531 million barrels, data from industry group the American Petroleum Institute showed yesterday.

Net US crude imports fell one million barrels per day to 1.9 million bpd, the EIA said.

However, at the same time USA gasoline and distillate stocks, which include diesel and heating oil, both rose against expectations for inventories to fall - highlighting the patchy nature of the recovery in fuel demand.

Gene McGillian, vice president of market research at Tradition Energy, said, "The market is now watching USA producers and OPEC+ [the Organization of the Petroleum Exporting Countries] consider plans to ramp up while demand isn't returning the way we thought it would a few weeks ago.the supply demand balance could get out of whack".

"The gasoline glut provides the poor eye candy in the report, which reinforces the fact this is not your typical USA driving season as the pandemic continues to ravage the US sunbelt".

Oil prices edged up on Wednesday after a steep drop in USA crude inventories, but another record day for COVID-19 cases worldwide kept gains in check.

"Despite the resilient and range-bound nature of oil pricing over recent weeks, plateauing global demand and increasing OPEC+ output raises the question of whether the market can absorb additional barrels", RBC Capital Markets said in a note.

Deaths from COVID-19 topped 150 000 in the United States on Wednesday, while Brazil, with the world's second-worst outbreak, set new daily records of confirmed cases and deaths.

The dollar extended its dramatic fall on Friday and was on course for its biggest monthly drop in a decade after news on Thursday that US gross domestic product collapsed at a 32.9% annualised rate - the steepest decline in output since records began in 1947.

The group, known as OPEC+, collectively plans to increase production from Saturday, adding about 1.5 million barrels per day to global supply, after slashing output in the wake of the pandemic.



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