TOKYO- Oil prices dipped on Wednesday, a fifth day of declines with investors wary about prospects for stronger fuel demand as the use of rail, air and other forms of transport remained constrained amid surging COVID-19 cases worldwide.
Brent crude was down 5 cents or 0.1 percent at $68.98 a barrel, having fallen 0.7 percent on Tuesday. US oil lost 6 cents or 0.1 percent to $66.53 a barrel after dropping 1 percent in the previous session.
“July oil demand looks pretty weak because of China’s industrial and retail slowdown, the floods there, as well as severe port congestion and a government clamp-down on the import quote of private refiners,” Henning Gloystein, energy director at Eurasia Group, said in a note.
“In India, the economic fallout of the severe Covid-19 outbreak earlier this year still weighs on the economy and consumer travel behaviour,” he added.
India, the world’s third-biggest crude importer, also started sales of oil to state-run refiners from its Strategic Petroleum Reserve (SPR), putting in practice a new policy to commercialize federal storage by leasing out space.
A stronger dollar was also hitting commodities across the board, with metals and precious gold in particular as “equally fragile” as oil, ANZ Research said in a note.
Crude is typically priced in dollars so a pricier Greenback makes oil more expensive, hitting demand.
In the United States, more supply is set to hit the market if official forecasts prove right.
US shale oil production is expected to rise to 8.1 million barrels per day (bpd) in September, the highest since April 2020, according to the government’s Energy Information Administration’s monthly drilling output report.
Crude and gasoline inventories in the United States are expected to have fallen last week, while distillate stockpiles are likely to have risen for a third straight week, an extended Reuters poll showed.
Based on the average estimates of nine analysts polled by Reuters, crude stocks dropped by around 1.1 million barrels in the week to Aug. 13.
China drew on crude oil inventories in July, marking the fourth consecutive month it has processed more crude that what was available from domestic output and imports.
The call on inventories was smaller in July than in the previous two months, but this was more a reflection of weak refinery processing rates rather than any underlying boost to demand.
China, the world’s biggest oil importer, appears to have taken about 223,700 barrels per day (bpd) from reserves in July, according to calculations based on official data.
The country doesn’t disclose the volumes of crude flowing into strategic and commercial stockpiles. But an estimate can be made by deducting the total amoun output from the amount of crude processed. – Reuters
