Oil prices steadied on Wednesday after four days of declines with investors still worried about the outlook for fuel demand as the use of rail, air and other forms of transport remained constrained amid surging COVID-19 cases worldwide.
“July oil demand looks pretty weak because of China’s industrial and retail slowdown, the floods there, as well as severe port congestion and a government clamp-down on the import quote of private refiners. In India, the economic fallout of the severe Covid-19 outbreak earlier this year still weighs on the economy and consumer travel behavior.” Henning Gloystein, energy director at Eurasia Group.
India, the world’s third-biggest crude importer, also started sales of oil to state-run refiners from its Strategic Petroleum Reserve (SPR), putting in practice a new policy to commercialize federal storage by leasing out space.
A stronger dollar was also hitting commodities across the board, with metals and precious gold in particular as equally fragile like oil, ANZ Research. Crude is typically priced in dollars so a pricier Greenback makes oil more expensive, hitting demand.
In the United States, more supply is set to hit the market if official forecasts prove right. U.S. shale oil production is expected to rise to 8.1 million barrels per day (BPD) in September, the highest since April 2020, according to the government’s Energy Information Administration’s monthly drilling output report.
Crude and gasoline inventories in the United States are expected to have fallen last week, while distillate stockpiles are likely to have risen for a third straight week.
Based on the average estimates of nine analysts polled by Reuters, crude stocks dropped by around 1.1 million barrels in the week to Aug. 13.