After climbing for four days, oil futures suffered a loss on Thursday and analysts said it was due to a surprising fall in U.S. weekly first-time jobless claims against continued pessimism about fuel demand.
West Texas Intermediate crude for September dropped 0.6% or 24 cents and closed at $41.95 a barrel on the New York Mercantile Exchange. October Brent crude, the global benchmark fell 8 cents or 0.2% before settling at $45.09 a barrel in trading on the ICE Futures Europe.
What might have sparked the drop in U.S. trading was the good news that initial jobless claims dropped by 249,000 in early August to 1.19 million. It was the lowest level since the coronavirus pandemic began more than four months ago reported MarketWatch.
“The U.S. economy seems to be headed in the right direction once again and that should do wonders for crude demand expectations,” said Edward Moya, senior market analyst at Oanda, in a note. “A broad decline in jobless claims should only improve as new virus cases continue to decline and it seems COVID-19 deaths might have peaked.”
There was also good news about oil prices in the Middle East. Saudi Aramco on Thursday set its official selling price, or OSP, for Europe and Asia at 90 cents a barrel over the Oman/Dubai average, down 30 cents from August, according to Reuters. The reduction came as a relief to traders who had feared the Saudis would make a deeper cut in an effort to gain market share and also to punish countries like Nigeria, Angola and Iraq, who have appeared to pay little heed to OPEC+ production curbs, said Robert Yawger, director of energy trading at Mizuho Securities U.S.A.
“The restrained Saudi OSP is a victory for the market bulls,” he said.
WTI and Brent on Wednesday broke out of a longstanding trading range. Both posted their highest settlements since early March, but ended off session highs even though the Energy Information Administration said U.S. crude stocks fell by a much larger-than-expected 7.4 million barrels in the week ended July 31, while gasoline inventories unexpectedly rose 419,000 barrels. Distillate supplies increased by a much larger-than-expected 1.6 million barrels.
Oil’s gains appear to have been driven by growing hopes Congress and the White House will agree on another round of coronavirus fiscal stimulus, the fall in crude inventories, and the slide in the U.S. dollar, which has traded at more than two-year lows based on the ICE U.S. Dollar Index said Warren Patterson, head of commodities strategy at ING, in a note.
But the message sent by the rise in product inventories could dampen prospects for further gains, he said, noting that distillate stocks are slightly below 180 million barrels, which is more than 42 million barrels above levels seen this time last year. Meanwhile, implied demand for total products fell by 1.18 million barrels over the week.
“It is difficult to get overly constructive towards the oil market with demand having stalled and this product overhang,” Patterson said.
The fall in oil might have played a role in a drop in values of some Oklahoma related energy firms including Devon Energy where shares fell 27 cents or 2.24% before finishing at $11.77.
SandRidge Energy plunged 11.30% or 20 cents a share and ended the day at $1.57.
Ovintiv Inc. closed up a nickle for a 0.45% gain at $11.12 a share.
ConocoPhillips (COP) up 0.03 at 38.04 – change 0.07%
Devon (DVN) down 0.27 at 11.77 – change 2.25%
Diamondback Energy (FANG) down 0.90 at 40.72 – change 2.17%
Energy Transfer LP (ET) down 0.22 at 6.63 – change 3.15%
EOG Resources (EOG) up 0.14 at 50.89 – change 0.27%
ExxonMobil (XOM) down 0.21 at 43.64 – change 0.48%
Kinder Morgan (KMI) down 0.15 at 14.30 – change 0.97%
Marathon Oil Corp. (MRO) down 0.30 at 5.68 – change 5.02%
National Oilwell Varco (NOV) down 0.03 at 11.98 – change 0.25%
Noble Energy (NBL) down 0.08 at 10.35 – change 0.68%
Occidental Petroleum (OXY) down 0.49 at 15.45 – change 3.08%
ONEOK (OKE) down 1.38 at 29.11 – change 4.53%
Phillips 66 (PSX) down 0.99 at 60.97 – change 1.60%
Pioneer Natural Resources (PXD) down 0.29 at 102.36 – change 0.29%
Valero (VLO) down 0.15 at 51.48 – change 0.28%
CLOSING TOP UTILITY STOCKS
American Electric Power (AEP) up 0.54 at 85.37 – change 0.63%
CenterPoint (CNP) up 1.25 at 20.27 – change 6.57%
Source: MarketWatch