Oil prices decline over lingering demand concerns

Prices of crude oil came under pressure due to weak demand expectation in China and falling crude oil import in the United States.

The imbalance between supply and demand has left the market depressed.

Oil prices had surged after 50 basis points US Fed rate cut was price in on commodities complex. The impact on energy costs quickly fizzle out over bearish demand outlook in China and uncertainties in the US.

Brent crude and WTI both falling 0.4% to $74.56 a barrel and $70.88 a barrel, respectively on Friday. Brent has performed poorly recently, with the OPEC+ decision to extend voluntary cuts to December doing little to improve sentiment, BMI analysts say in a note.

China has obviously been the key concern when it comes to demand, but there have also been reports of refiners in Europe cutting run rates due to poor margins, ING commodities strategists said in a note.

US commercial crude oil inventories decreased by 0.4% during the week ending Sept. 13, according to data released by the Energy Information Administration (EIA) late Wednesday.

Inventories fell by around 1.6 million barrels to 417.5 million barrels, higher than the market prediction of a decline of about 200,000 barrels.

This is somewhat different to the 1.96 million barrel build the American Petroleum Institute (API) reported the previous day.

Strategic petroleum reserves, which are excluded from commercial crude stocks, increased by approximately 700,000 barrels to 380.6 million barrels last week, the data revealed. Over the same period, gasoline inventories rose by around 100,000 barrels to 221.6 million barrels.

US commercial crude oil inventories are now at their lowest level in a year, said ING in a note. Crude inventories at the WTI delivery hub, Cushing, also fell by 1.98m barrels over the week to 22.71m barrels, which will also create noise around inventories nearing tank bottoms.

The US administration is looking to buy 6 million barrels of crude oil for the Strategic Petroleum Reserve (SPR) for delivery February-May 2025.

Given the recent weakness in oil prices, it makes sense for the Department of Energy (DoE) to increase purchases to refill the SPR, ING said.