By David Ho
Investing.com – Oil prices held steady in early trade on Thursday, sitting around multi-week lows based on concerns about fuel demand due to a patchy U.S. economic recovery.
WTI Futures were up 0.24% to $41.61 by 10:56 PM ET (3:56 AM GMT), and Brent oil futures inched up 0.09% to $44.47. Both benchmark contracts saw falls of more than 2% on Wednesday, with WTI sliding to its lowest close in nearly four weeks and Brent at its lowest since Aug. 21.
This was after a U.S. Federal Reserve survey revealed the economic recovery was mixed. Data released on Thursday demonstrated slower than expected jobs growth for August, with the ADP nonfarm employment change at 428,000, lower than the predicted 950,000. However, factory orders rose 6.4% month-on-month in July against the predicted 6%.
Other signs of a limited recovery include a drop to 8.78 million barrels per day in U.S. gasoline demand in the week to Aug. 28 from 9.16 million bpd a week earlier, the U.S. Energy Information Administration (EIA) said on Thursday.
“All in all, we think there is enough spare oil capacity and enough pressure on demand growth to justify only a gradual increase in oil prices over the next 12 months,” said Vivek Dhar, commodities analyst for Commonwealth Bank (CBA), in a note.
But EIA data also showed a 9.362 million-barrel draw in crude oil supply for the week ended August 28, much bigger than the predicted 1.887 million-barrel draw. The data comes on the heels of the American Petroleum Institute (API) report of a 6.360 million-barrel draw for the same period on Tuesday.
But with U.S. refinery run rates falling to 76.5% of total capacity during the previous week due to shutdowns ahead of Hurricane Laura, refinery maintenance and the end of the summer driving season increased investor worries of a drop in fuel demand.
“These factors suggest a seasonal drop off in refinery runs and higher oil inventory levels as we advance through September,” said Stephen Innes, market strategist for AxiCorp.
CBA forecasts Brent will average $46 a barrel in the fourth quarter before rising to $55 by the end of 2021.
“We see downside risks to our outlook linked to the uncontrolled spread of COVID-19,” noted Dhar.