Oil ends lower as demand concerns undermine support from supply decline
Oil futures settled with a loss on Thursday, as concerns over a slowdown in energy demand, due to the impact of the latest resurgence of coronavirus pandemic, undermined support provided Wednesday from a bigger-than-expected drop in U.S. crude supplies.
Slowing travel activity in China amid a resurgence in COVID-19 fed expectations for weaker demand from the world’s biggest energy consumer.
Oil earlier found support in early Thursday, as prices attempted to extend gains from Wednesday, when the Energy Information Administration reported a 10 million-barrel decline in last week’s U.S. crude inventories.
Despite the “substantial draw of crude supplies, most of the draw was a result of lower net imports,” Manish Raj, chief financial officer at Velandera Energy, told MarketWatch. “Inventory variance resulting from large swings in net imports are usually ignored by the market since they do not resemble underlying supply or demand, and just reflect timing of cargo loading or unloading.”
West Texas Intermediate crude for March delivery
fell by 51 cents, or 1%, to settle at $52.34 a barrel on the New York Mercantile Exchange.
March Brent crude
which expires at the end of Friday’s session, declined by 28 cents, or 0.5%, to $55.53 a barrel on ICE Futures Europe. April Brent
the most active contract, shed 43 cents, or 0.8%, at $55.10 a barrel.
“Broader market concerns continue to weigh on crude prices, particularly as it relates to demand weakness over the next quarter amid high numbers of new COVID-19 cases, and a vaccine rollout that is still in the early stages,” said Robbie Fraser, manager of global research & analytics at Schneider Electric.
Chinese authorities have taken steps to dissuade travel around the Lunar New Year, the Associated Press reported, noting officials predict Chinese will make 1.7 billion trips during the travel rush, down 40% from 2019. Travel was curtailed in 2020 due to the coronavirus.
“Chinese road and air travel mobility data are declining into the Chinese New Year holiday due to travel restrictions and a spike in coronavirus infections,” said Stephen Innes, chief global markets strategist at Axi, in a note. “Simultaneously, worries of vaccine rollouts leading to protracted lockdowns in Europe round out the carousel of negativity.”
Read: OPEC’s Barkindo stresses importance of oil market stability and investment
Meanwhile, natural-gas futures finished lower after the U.S. Energy Information Administration reported on Thursday that domestic supplies of natural gas declined by 128 billion cubic feet for the week ended Jan. 22.
On average, the data were expected to show a drop of 136 billion cubic feet for the week, according to analysts polled by S&P Global Platts.
March natural gas
fell by 4 cents, or 1.4%, to $2.664 per million British thermal units.
“Natural-gas prices are balancing between bearish sentiments resulting from expectation of warmer temperatures and bullish sentiments resulting from higher [liquified natural gas] export demand,” said Velandera Energy’s Raj.
Also on Nymex, February gasoline
tacked on 0.4% to $1.5829 a gallon, but February heating oil
shed nearly 0.5% to $1.6017 a gallon. The February contracts expire at the end of Friday’s regular trading session.