Oil fell from a five-month high in New York, fluctuating with other risk assets, even as investors look for clear signs about a sustained recovery in demand.
Futures closed at the highest level since early March on Wednesday after U.S. inventories fell to the lowest in more than three months. Still, gasoline and distillate stockpiles rose by a combined 2 million barrels last week as the summer driving season nears its end, capping further gains in prices.
Oil has closely followed the dollar in recent weeks. The currency declined 0.5% on Wednesday, making commodities such as crude more attractive for investors. It was little changed on Thursday, after swinging between gains and losses. European equities edged lower.
While New York crude is up about four per cent this week, following days of being anchored near $40, there are plenty of reasons for traders to be cautious. Data show that refining crude into fuels in Europe continues to be loss-making, pointing to the patchy recovery in demand. Rising coronavirus cases in many parts of the world still pose a big risk to any economic recovery.
“The focus will remain on the dollar’s direction, stimulus packages, trade deals and coronavirus lockdown fears,” said ABN Amro senior energy economist, Hans van Cleef. “The upside for the oil price remains limited.”
- West Texas Intermediate for September delivery lost 0.7 per cent to $41.89 a barrel as of 11:08 a.m. London time
- Brent for October settlement was little changed at $45.16
It’s not just Europe that’s showing weak refining margins. The so-called 3-2-1 crack for combined gasoline and diesel against U.S. WTI – a rough profit gauge for processing a barrel of crude – held near $10 a barrel for a third consecutive day on Thursday. The measure is at its lowest seasonal level in nearly a decade as the pandemic keeps Americans off the road during the normally busy summer driving season.
© 2020 Bloomberg L.P.