Oil falls 3pc, heads for weekly drop on demand concerns

NEW YORK: Oil prices fell nearly 3% on Friday, headed for their biggest weekly decline since June as concern around a slow economic recovery from the COVID-19 pandemic added to worries about weak oil demand.

Brent crude, the international benchmark, dropped $1.08, or 2.5%, to $42.99 a barrel, by 10:53 a.m. EDT (1453 GMT). US West Texas Intermediate (WTI) fell $1.12, or 2.7%, to $40.25 a barrel.

Brent was on track for a weekly loss of 4.5%, while WTI was set to lose 6.3%

Prices were pressured by a report showing US job growth slowed further in August as financial assistance from the government ran out.

Nonfarm payrolls increased by 1.37 million jobs last month, though employment remained 11.5 million below its pre-pandemic level and the jobless rate was 4.9 percentage points higher than in February.

The unemployment rate fell to 8.4% last month, compared to a forecasted 9.8%, which some market analysts said would lessen urgency in Washington, D.C. to pass additional economic stimulus legislation.

"The hopes for more stimulus are going out the window," said John Kilduff, partner at Again Capital in New York. "We need to see economic activity back up to get demand flowing."

A US government report this week showed domestic gasoline demand has fallen again, while middle distillate inventories at Asia's Singapore oil hub have surpassed a nine-year high, official data showed..

"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.

Global oil demand could fall by 9-10 million barrels per day (bpd) this year due to the pandemic, Russian Energy Minister Alexander Novak said.

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 bpd, according to a Reuters survey.