Oil prices have slipped as concerns about weak fuel demand re-emerged after production in south-eastern US platforms resumed following storm Sally’s passage.
Brent crude LCOc1 fell by $0.36, or 0.8%, to reach $41.86 a barrel, while US West Texas Intermediate (WTI) CLc1 futures were down by $0.43, or 1.1%, to settle at $39.73 a barrel, Reuters reported.
Oil prices also inched lower due to an unexpected rise in US distillate stocks, including diesel and heating oil.
This raised fuel demand concerns in the world’s biggest economy.
Vanda Insights oil market analyst Vandana Hari was quoted by the news agency as stating: “We are seeing some profit-taking this morning from market participants who remain broadly sceptical that crude has priced in the market’s weaker turn through Q3-Q4 and specifically don’t buy into yesterday’s sharp rebound.”
Data released by the US Energy Information Administration (EIA) showed a rise in the distillate stockpiles by 3.5 million barrels last week.
The EIA report showed that weekly demand for the fuel fell to 2.81 million barrels of oil per day (Mbpd), which is 27.2% down from a year ago.
Commonwealth Bank Commodities Analyst Vivek Dhar said in a note: “That’s a powerful disincentive for refiners to boost activity and directly signals the demand pressures facing a suite of oil products.”
Meanwhile, energy companies started to return staff to offshore oil platforms in the Gulf of Mexico after storm Sally reached the shore. About 500,000 barrels per day of US Gulf of Mexico offshore oil output was closed ahead of the arrival of Hurricane Sally.
Oil production in the region has been interrupted by storms for the second time in less than a month after Hurricane Laura.
The market monitoring panel of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+, will meet today to discuss compliance with deep supply cuts.
According to Reuters, analysts don’t expect any further cuts despite a drop in prices.
Vandana Hari added that the meeting may have a minimal impact market sentiment as the OPEC+ group has consistently sent ‘signals that they have the matter of some members’ lack of quota-compliance under control and will doggedly pursue the compensation mechanism to set it right’.
OPEC+ has been reducing supply by approximately 9.7Mbpd since 1 May.
In July, the group agreed to restrict supply cuts to 7.7Mbpd from August to December.