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Markets

Oil holds above $44, heads for weekly drop on demand concerns

  • Brent on track for biggest weekly drop since June
  • US gasoline demand drops
  • Singapore distillate inventories soar
04 Sep 2020

LONDON: Oil held above $44 a barrel on Friday and was on course for its biggest weekly decline since June as weak demand figures added to concern over a slow recovery from the COVID-19 pandemic.

A US government report showed that domestic gasoline demand fell in the latest week. Middle distillates inventories at Asia's Singapore oil hub have soared above a nine-year high, official data showed..

Brent crude, the international benchmark, was up 30 cents, or 0.7%, at $44.37 by 1130 GMT, heading for a 1.5% drop this week.

US West Texas Intermediate (WTI) rose 36 cents, or 0.9%, to $41.73, though WTI's advance looks unlikely to prevent its first weekly drop in five.

"Despite the price gains today, which somehow smoothed the losses of the week, the bigger market picture is overall bearish sentiment that kicked off with lower gasoline demand reports on Wednesday," said Paola Rodriguez-Masiu, analyst at Rystad Energy.

In focus on Friday will be US payrolls figures at 1230 GMT, which could be a selling trigger if an expected slowdown in hiring is steeper than forecast. The unemployment rate is expected to fall to 9.8% from 10.2%.

"Demand concerns are firmly front and centre of traders' minds," said Stephen Brennock of oil broker PVM. "Today's non-farm US payroll report will be closely watched and a disappointing number could be the next bearish catalyst."

Oil has recovered since April, when Brent slumped to a 21-year low below $16 and US crude briefly went into negative territory.

A record supply cut since May by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, has supported prices.

OPEC began in August to ease the scale of the cuts, raising output by almost 1 million barrels per day according to a Reuters survey.

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