By Adedapo Adesanya
Oil fell for the second consecutive session on Thursday, after the US government reported weak fuel demand in the country, with Brent crude futures losing $1.74 or 2.1 per cent to settle at $81.86 a barrel and the US West Texas Intermediate (WTI) crude futures declining by $1.32 or 1.7 per cent to $77.91 a barrel.
US crude stocks fell more than expected last week as refiners ramped up to their highest utilization rates in over nine months, data from the US Energy Information Administration (EIA) showed.
The EIA said there was an estimated inventory decline of 4.2 million barrels for the week to May 24, as fuel inventories rose.
The crude inventory figure compared with a modest increase of 1.8 million barrels for the previous week and the American Petroleum Institute (API) estimate for a 6.5 million barrels inventory draw for the week to May 24 on Wednesday.
Analysts had expected the U.S. Memorial Day holiday on May 27, the start of the US summer driving season would boost fuel demand. However, EIA’s measure of fuel demand slipped about 2 per cent from the prior week to 9.15 million barrels per day.
Market analysts noted that oil prices were further pressured by investors’ risk appetite subdued by the prospect of delayed monetary easing in the US and Europe.
Oil investors are also cautious ahead of the meeting of the Organisation of the Petroleum Exporting Countries and allies, known as OPEC+, which pushed back by a day to June 2 and will be held online. The producer group will decide whether to extend, deepen or unwind supply cuts.
The producers will discuss whether to extend voluntary output cuts of 2.2 million barrels per day into the second half of the year, with some sources from OPEC+ countries saying an extension was likely.
Combined with another 3.66 million bpd of production cuts valid through the end of the year, the output cuts are equivalent to nearly 6 per cent of global oil demand.
OPEC has said it expects another year of relatively strong oil demand growth of 2.25 million barrels per day, while the International Energy Agency expects much slower growth of 1.2 million barrels per day.
Markets will also be watching the US personal consumption expenditures index this week for more signals about interest rate policy. The index, due to be released on May 31, is reportedly the US Federal Reserve’s preferred measure of inflation.
Meanwhile, another Houthi attack on a ship in the Red Sea has reinforced suspicions that normal traffic through the Suez Canal is not about to return anytime soon.
This is as Israel seized control over Gaza’s border with Egypt suggesting the war there is not ending anytime soon either, and with it, the risk of escalation that could jeopardize Middle Eastern oil supply.