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Markets

Oil prices at one-month low on demand worries

  • Drop in US gasoline demand, weak job data weigh.
  • Upcoming refinery maintenance to hurt crude demand – analysts.
  • Iraq denies it was seeking exemption from OPEC+ oil cuts.
03 Sep 2020

LONDON: Oil prices extended losses on Thursday, falling to their lowest point since early August, as worries about weaker US gasoline demand and a sluggish economic recovery from the COVID-19 pandemic dented sentiment.

Brent crude fell 55 cents, or 1.24%, to $43.88 a barrel by 1403 GMT, having hit a session low of $43.21. US West Texas Intermediate (WTI) crude futures were down 39 cents, or 0.9%, at $41.12 a barrel, after hitting a session low of $40.22.

Both benchmarks fell more than 2% on Wednesday.

US gasoline demand last week fell to 8.78 million barrels per day (bpd) from 9.16 million bpd a week earlier, Energy Information Administration (EIA) data showed on Wednesday, with consumption of other oil products also falling.

"It is the latest data set that possibly caught the eye of those who ran long positions, and not even another record close in the US stock market was able to change the direction of the herd," Tamas Varga of oil brokerage PVM said.

Oil markets, however, drew some support from Iraq's denial it was seeking exemption from OPEC+ oil cuts during the first quarter of next year.

OPEC's second largest producer also said it may seek to extend by two months until the end of November the period for making additional compensation cuts under the OPEC+ deal.

Analysts warn that the upcoming refinery maintenance and the end of the summer driving season would also limit crude demand.

WTI crude has come under pressure "after US refiners earmarked a long list of maintenance closures over the coming months that will no doubt impact demand for crude oil", ANZ Research said in a note on Thursday.

Due to shutdowns ahead of Hurricane Laura, US refinery utilization rates fell by 5.3 percentage points to 76.7% of total capacity, the EIA said.

"These factors suggest a seasonal drop-off in refinery runs and higher oil inventory levels as we advance through September," AxiCorp market strategist Stephen Innes said.

The number of Americans filing new claims for unemployment reached a seasonally adjusted 881,000 for the week ended Aug. 29, compared with 1.011 million in the prior week, US Labor Department data showed on Thursday.

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