Oil Remains Under Pressure As Traders Are Worried About Gasoline DemandOil continues to lose ground and tries to settle below the 50 EMA at $40.80.
Oil Video 03.09.20.
Slowdown In Gasoline Demand Puts Pressure On Oil Prices
Yesterday, EIA provided its Weekly Petroleum Status Report which indicated that U.S. crude inventories declined by 9.4 million barrels. However, oil traders preferred to focus on gasoline demand, which fell from 9.16 million barrels per day (bpd) to 8.79 million bpd.
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While the decline in demand for gasoline could have been caused by Hurricane Laura, the main problem is that gasoline demand remains well below last year’s numbers.
A year ago, demand for gasoline was 9.73 million bpd. The latest four-week gasoline demand average is 8.87 million bpd. The pace of the gasoline demand recovery is slowing down which is a worrisome development at a time when the driving season is about to end.
I’d note that it’s too early to say whether gasoline demand recovery has stalled. Hurricane Laura has distorted the data so traders will have to wait a few weeks to see a clearer picture of what’s going on with gasoline demand.
Iraq States That It Does Not Want To Get An Exemption From OPEC+ Deal
Yesterday, we discussed Iraq’s decision to get an exemption from the OPEC+ deal in the first quarter of 2021. Today, Iraq refuted previous reports and stated that it had no such intention.
Interestingly, the original reports originated out of an interview of Iraq’s Oil Minister Ihsan Abdul Jabbar, so the situation looks rather strange.
Anyway, Iraq stated that it continued to target full compliance with the OPEC+ deal which is good for the oil market. Iraq also noted that it may have to ask for two more months to make additional production cuts that compensate for its previous overproduction.
Meanwhile, Russian Energy Minister Alexander Novak stated that Russia was ready to propose a reaction to the growing oil demand under the OPEC+ deal. Russia’s economy suffers from lower oil revenues so Russia is keen to increase its oil production faster than outlined in the original deal.
It remains to be seen whether Saudi Arabia will agree with such approach because the supply/demand balance remains fragile as the world continues its battle against the pandemic.
For a look at all of today’s economic events, check out our economic calendar.