Dash Talk

Oil holds near $44, heads for weekly drop on demand concerns

FILE PHOTO: The sun sets behind a crude oil pump jack on a drill pad in the Permian Basin in Loving County, Texas, U.S. November 24, 2019. REUTERS/Angus Mordant

LONDON (Reuters) – Oil held around $44 a barrel on Friday and was heading for its biggest weekly decline since June, as weak demand figures added to concerns of a slow recovery from the COVID-19 pandemic.

A U.S. government report showed domestic gasoline demand fell in the latest week [EIA/S]. Middle distillates inventories at Asia’s oil hub Singapore have soared above a nine-year high, official data showed..

Brent crude LCOc1, the international benchmark, was up 5 cents, or 0.1%, to $44.12 at 0745 GMT, heading for a 2.3% drop this week. U.S. West Texas Intermediate (WTI) CLc1 fell 3 cents to $41.34, set for the first weekly drop in five weeks.

In focus on Friday will be U.S. payrolls figures at 1230 GMT, which could be a selling trigger if an expected slowdown in hiring is steeper than forecast. The unemployment rate is expected to fall to 9.8% from 10.2%.

“Demand concerns are firmly front and centre of traders’ minds,” said Stephen Brennock of oil broker PVM. “Today’s non-farm U.S. payroll report will be closely watched and a disappointing number could be the next bearish catalyst.”

FGE analysts said rising coronavirus cases worldwide and renewed lockdowns would dash hopes of a drawdown in oil inventories for some time. The pressure remains on refiners to keep operating rates low, FGE said.

Oil has recovered from April, when Brent slumped to a 21-year low below $16 and U.S. crude briefly went into negative territory.

A record supply cut since May by the Organization of the Petroleum Exporting Countries and allies, a grouping known as OPEC+, has supported prices.

OPEC began in August to ease the volume of the cutback, raising output by almost 1 million barrels per day according to a Reuters survey. [OPEC/O]

Additional reporting by Florence Tan and Koustav Samanta; Editing by Mark Potter

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