By Geoffrey Smith
Investing.com -- Crude oil prices drifted lower by mid-morning in New York on Thursday after the International Energy Agency trimmed its forecast for global oil demand this year in its latest monthly report.
However, reasonably solid data from the U.S. labor market, where initial jobless claims fell below 1 million for the first time March, helped to keep prices supported, suggesting that the U.S. economic recovery is still intact, despite various setbacks in recent weeks.
Prices had hit a five-month high on Wednesday after the U.S. Energy Information Administration confirmed a bigger-than-expected fall in inventories of crude, gasoline and other distillates last week. That extended a trend of gradual erosion of the huge stockpiles that had accumulated during the second quarter as lockdowns across the globe paralyzed demand.
By 10:40 AM ET (1440 GMT), U.S. crude futures were down 0.5% at $42.48 a barrel, while the global benchmark Brent was down 0.6% at $45.17 a barrel.
Gasoline RBOB Futures also drifted lower without threatening to break out of recent trading ranges. By 10:40, they were down 1.0% at $1.2390 a gallon.
As with OPEC’s monthly report earlier in the week, the IEA still expects the oil market to tighten over the rest of the year, albeit not by as much as first thought. The biggest reason for that is the failure of fuel demand from airlines to recover. The IEA now estimates that kerosene demand will fall by 3.1 million barrels a day this year to an average of 4.8 million b/d. That’s around 380,000 less than its previous forecast.
By contrast, demand for gasoline and diesel has recovered more strongly. The EIA estimated this week that U.S. gasoline demand is now back at pre-pandemic levels (albeit normally it would be above February levels due to seasonal factors - demand is still around 1 million b/d down in year-on-year terms, according to Macquarie analysts).
Overall, the IEA cut its demand estimates for the last two quarters of this year by 500,000 barrels a day, projecting consumption of 95.25 million b/d on average through year-end.