An aerial view of the Phillips 66 oil refinery in Linden, New Jersey, United States is seen. Oil prices rose in early Asian trade on Thursday, hitting multi-month lows in the previous session on data pointing to weak U.S. fuel demand.
Tayfun Cosku | Anadolu Agency | Getty Images
Oil prices fell on Thursday as the market weighed tight supply against fears of a slowdown in demand, after rising US crude and gasoline inventories pushed prices to record lows of several months in the previous session.
Brent crude futures were down $1.04, or 1%, at $95.70 a barrel, while West Texas Intermediate (WTI) crude futures were down 80 cents at $89.82 a barrel .
Both benchmarks fell on Wednesday to their weakest levels since before Russia’s Feb. 24 invasion of Ukraine, which Moscow calls “a special operation.”
The move followed an unexpected rise in US crude inventories last week. Gasoline inventories, the demand proxy, also showed surprising growth as demand slowed, the Energy Information Administration said.
The outlook for demand remains clouded by growing concerns about an economic downturn in the United States and Europe, debt distress in emerging market economies and a strict zero-Covid-19 policy in China, the largest oil importer Of the world.
An agreement by OPEC+ on Wednesday to raise its output target by just 100,000 barrels per day (bpd) in September, equivalent to 0.1% of global demand, was seen as bearish for the market.
“The largely symbolic increase obviously won’t provide a significant buffer to any potential supply shock, but the oil balance sheet won’t tighten either,” said Tamas Varga of oil brokerage PVM.
Also, OPEC heavyweights Saudi Arabia and the United Arab Emirates are poised to offer a “significant increase” in oil production if the world faces a severe supply crunch this winter, they say sources familiar with the thinking of the main Gulf exporters.
Even so, analysts expect that OPEC+’s limited excess capacity – he highlighted in a statement on Wednesday – will support prices in the longer term.
“We think (limited spare capacity) will effectively translate into an output increase of only a third of the volumes agreed in September,” UBS oil analyst Giovanni Staunovo said.
Edward Moya, senior analyst at OANDA, said he expected prices to trend higher even with the worsening economic context.
“Crude oil prices should find strong support around the $90 level and eventually recover towards the $100 a barrel level, even as the global economic slowdown accelerates,” he said.
Additional support for prices came from the Caspian Pipeline Consortium (CPC), which connects Kazakh oil fields to Russia’s Black Sea port of Novorossiisk, which said on Wednesday that supplies had fallen significantly.