(Bloomberg) — Oil slid from a five-month high after U.S. economic data signaled a sluggish labor market, following cautionary signals from OPEC+ on a demand rebound amid the pandemic.
Futures in New York fell more than 3% on Thursday. Applications for U.S. unemployment benefits unexpectedly increased last week, boding poorly for oil consumption as millions of Americans remain out of work.
Magnifying the dour view for a pickup in demand, minutes from the U.S. Federal Reserve said the pandemic would weigh heavily on economic activity. OPEC+ also warned at a meeting Wednesday that the pace of the demand rebound was slower than expected and at risk from a prolonged second wave of the coronavirus.
The rise in jobless claims “is raising concerns of a slowing economy hurting demand,” said Phil Flynn, senior market analyst at Price Futures Group.
U.S. benchmark futures have rebounded from negative territory in April, but are still having difficulty rallying past the mid-$40 a barrel range. U.S. government data shows shrinking domestic crude stockpiles, but the demand picture remains murky as countries struggle to contain surging infections. Energy Aspects Ltd. lowered its global jet fuel demand forecasts for August and September, citing slower than anticipated growth in Europe, Asia and the U.S.
“The stage is set for future strength, but demand questions remain in the immediate term,” TD Securities commodity strategists including Bart Melek said in a note. Weaker refinery runs, exports and distillate demand in the Energy Information Administration report “continued to show the demand side of the equation remains volatile and uncertain.”
In physical markets, the average premiums for U.S. Gulf Coast sour crudes Mars, Poseidon and Southern Green Canyon are trading at the lowest levels in nearly a month in response to weak refinery demand. Nationwide refinery runs were at 80.9% last week, the weakest seasonally in decades.
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