Oil was down on Thursday morning in Asia, giving up some gains from the previous session over continuous weaker fuel demand concerns.
Brent oil futures were down 0.66% to $41.94 by 11:42 PM ET (4:42 AM GMT) and WTI futures fell 0.82% to $39.83, after both benchmarks saw gains of up to 5% during the previous session.
Hurricane Sally, the second hurricane to hit the Gulf of Mexico area in less than a month, making landfall on Wednesday and weakened into a tropical depression. Energy companies are slowly returning crews to offshore oil platforms in the storm’s aftermath, but almost 500,000 barrels per day (bpd) of the area’s output was shut ahead of Sally’s arrival.
Meanwhile, the U.S. Energy Information Administration on Wednesday announced a draw of 4.389 million barrels for the week to September 11, on the heels of the 9.517 million-barrel draw recorded by the American Petroleum Institute a day before.EIA reported a 2.032 million-barrel build for the previous week.
But some investors were more concerned by the EIA’s report of a 3.461 million-barrel rise in weekly distillate stockpiles, much bigger than the forecast 600,000-barrel build and the previous week’s 1.675 million-barrel draw.
“Distillate demand … is a key point of concern,” with stockpiles jumping to their highest level for this time of year since at least 1991, and U.S. refiners’ margins for distillate production at the lowest in 10 years, Commonwealth Bank commodities analyst Vivek Dhar said in a note.
“That’s a powerful disincentive for refiners to boost activity and directly signals the demand pressures facing a suite of oil products,” the note added.
OPEC+’s joint ministerial monitoring committee will meet later in the day to review the market, with some investors expecting that the committee will not recommend further production cuts to those already in place. OPAC+ agreed to a 7.7 million bpd, or around 8% of global demand, cut in production in July, in effect from August through to December. Countries such as Iraq agreed to pump below their quotas earlier in the month in order to offset overproduction earlier in the year.