- Oil’s demand indicator reached its lowest point since the beginning of the year.
- A 30% increase in fuel prices during the third quarter of this year led to decreased demand.
- Data revealed a slowdown in growth within the US services sector in September.
On Wednesday, oil prices dropped over $5 due to a decline in fuel demand and a gloomier economic outlook. Both benchmark prices hit session lows, plummeting more than $5, while heating oil and gasoline futures also saw a more than 5% decrease. Since last week’s settlement, crude oil prices have fallen by approximately $10.
The US Energy Information Administration reported that finished motor gasoline supplied as a demand indicator reached its lowest point since the beginning of the year, falling to about 8 million barrels per day.
Additionally, US gasoline consumption is currently at its lowest level in 22 years, as highlighted by commodity analysts at JP Morgan.
According to analysts in a note from Wednesday, a 30% increase in fuel prices during the third quarter of this year led to decreased demand. It resulted in an unexpected seasonal drop of 223,000 barrels per day.
Gasoline stocks surged by 6.5 million barrels, exceeding the anticipated 200,000-barrel rise. On the other hand, US nationwide crude stocks decreased by 2.2 million barrels to 414.1 million barrels in the week ending September 29. Still, stocks at Cushing, Oklahoma, the WTI delivery hub, increased for the first time in eight weeks.
Meanwhile, Saudi Arabia’s energy ministry confirmed its commitment to maintaining a voluntary cut of 1 million bpd in crude supply until the end of the year. At the same time, Russia announced it would continue its 300,000 bpd crude export cuts. Furthermore, Russia stated that in November, it would reevaluate its voluntary 500,000 bpd output cut started in April.
US services activity (Institute for Supply Management)
Economic news also weighed on oil prices, as data revealed a slowdown in growth within the US services sector in September. A downturn in the US economy affects oil demand.
As state media agency KUNA reported, Kuwait’s oil minister, Saad Al Barrak, stated that oil markets were moving in the “right direction.” At the same time, Russian Deputy Prime Minister Alexander Novak acknowledged that the Saudi and Russian cuts had helped stabilize oil markets. Moreover, he noted the benefits of the Kremlin’s ban on diesel and gasoline exports in the domestic market.
