Oil Futures Extend Losses Thursday on Weak Demand Outlook

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange extended losses into a second session Thursday, sending prompt-month RBOB futures 1.8% lower as firming U.S. Dollar Index and concerns over sluggish demand for motor gasoline heading into the end of the summer driving season dented risk-on trade.

In early trading, NYMEX West Texas Intermediate for October delivery tumbled more than $1 to a four-week spot low at $40.22 per barrel (bbl). ICE Brent November futures also fell to a four-week spot low, down more than $1 to $43.21 bbl. NYMEX RBOB October futures dropped back more than 2 cents to a $1.1775 gallon four-week spot low, while October ULSD futures was down more than 4 cents after losing 4.23 cents on Wednesday to trade at a two-month spot low at $1.1448 gallon.

U.S. gasoline demand last week fell to 8.78 million barrels per day (bpd) from 9.16 million bpd a week prior, Energy Information Administration data reported on Wednesday, with consumption of distillate fuels also falling. Although figures could be skewed due to Hurricane Laura, which battered Louisiana and Texas coasts last week, sluggish fuel demand is an ongoing concern for the industry struggling to recover from the coronavirus pandemic.

Data also showed total product supplied, a proxy for demand, declined by more than 13% during the reviewed week at 16.98 million bpd -- the largest weekly decline in demand since the week ended April 3, and pressed the demand indicator to the lowest rate since the week ended May 29.

For the broader economy, markets await the weekly release of U.S. jobless claims due at 8:30 a.m. ET and the monthly employment report for August from the U.S. Bureau of Labor Statistics set for release Friday morning. Economists expect the government's nonfarm payrolls report to show a gain of 1.32 million new hires in August, slightly below the 1.8 million increase the previous month. The unemployment rate is forecasted to decline to 9.8% from 10.2% in July.

ADP's payroll report released Wednesday showing 428,000 new jobs created last month missed market expectations, although was twice as much as July's 212,000 new jobs.

The largest employment increase came from the service sector, with leisure and hospitality leading the way with 129,000 new positions. Institute of Supply Management will release its assessment of economic activity in U.S. service sector in August at 10:00 a.m. ET, with consensus calling for a reading of 57 from 58.1 in a prior month.

Liubov Georges can be reached at liubov.georges@dtn.com

Liubov Georges