After U.S. government statistics revealed weak gasoline consumption during the busiest summer driving season, demand worries overcame tight global supply on Thursday, causing oil prices to decline for a second consecutive session.
By 0427 GMT, Brent oil futures had decreased by 77 cents, or 0.7 percent, to $106.15 per barrel after falling by 0.4 percent the previous day. Following a 1.9 percent decline on Wednesday, U.S. West Texas Intermediate oil futures dropped 88 cents, or 0.9 percent, to $99.00 a barrel.
Oil prices have fluctuated because traders have had to balance recessionary concerns that might reduce energy consumption with a tighter global supply due to the loss of Russian barrels because of Russia’s invasion of Ukraine.
According to official statistics released on Wednesday, the United States’ gasoline stockpiles increased by 3.5 million barrels last week, significantly above experts’ predictions for a 71,000-barrel increase. The statistics revealed that gasoline product supply, a proxy for demand, was roughly 8.5 million barrels per day, or about 7.6 percent lower than in the same period last year.
How Has the Rising Price Impact Demand?
The gasoline demand isn’t keeping up with the peak driving season, according to Stephen Schork, partner of The Schork Report. As gasoline stockpiles increased despite decreased refinery runs over the course of the week, Warren Patterson, head of commodities research at ING, said the U.S. inventory data was generally pessimistic.
The gasoline demand was once again seasonally low throughout the week, suggesting that increasing prices are having some effect on it, he continued. The National Oil Corp (NOC) said on Wednesday that crude production has resumed at various oilfields after the force majeure on oil exports was lifted last week, which also allayed concerns over Libya’s supply.
Despite this, the Keystone pipeline, one of Canada’s main oil export routes, continued to run at lower rates on Wednesday, according to a statement from its operator, TC Energy (NYSE: TRP), while work on a South Dakota power plant for a third party proceeded. According to Commonwealth Bank commodities analyst Vivek Dhar, Brent oil futures is likely to decline to US$100/bbl by Q4 2022, representing a slight dip from current levels.
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