[HOUSTON] Oil prices fell on Friday (Aug 29) as traders looked toward weaker demand in the US, the world’s largest oil market, and a boost in supply this autumn from Opec and its allies.
Brent crude futures for October delivery, which will expire on Friday, were down 49 cents, or 0.7 per cent, at US$68.13 a barrel, while the more active contract for November was down 57 cents, or 0.8 per cent, at US$67.41.
West Texas Intermediate crude futures were 60 cents, or 0.93 per cent, lower at US$63.99.
The market was in part shifting its focus toward next week’s Opec+ meeting, said Tamas Varga, analyst at PVM Oil Associates.
Crude output has increased from the Organization of the Petroleum Exporting Countries and its allies, known as Opec+, as the group has accelerated output hikes to regain market share, raising the supply outlook and weighing on global oil prices.
“Overall, the bottom line is we’re going to see a jump in supply feeding into a lackluster demand market,” said Andrew Lipow, president of Lipow Oil Associates.
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The US summer driving season ends on Monday’s Labor Day holiday, signalling the end of the highest demand period in the United States, which is the largest fuel market.
“The market is beginning to wonder what effect the tariffs might have on the economic outlook next year,” Lipow said, referring to tariffs imposed by the administration of US President Donald Trump on US imports from many trading partners.
Crude supply increases have not made their way into the US market yet, raising the possibility supply and demand will be in a tighter balance, said Phil Flynn, senior analyst with Price Futures Group.
“The pessimism about demand, I’m just not seeing it,” Flynn said. “Supply from Opec is supposed to increase, but we’re not seeing it in the US I think things are going to stay tight.”
Prices rose earlier in the week due to Ukrainian attacks on Russian oil export terminals, but reports of talks between Ukraine’s European allies about a possible ceasefire helped tamp down prices, Flynn said.
US crude inventories for the week ending Aug 22 showed higher-than-expected draws, implying late-summer demand was still firm, particularly in industrial and freight-related sectors, analyst Ole Hvalbye at SEB bank said.
Investors are also watching for India’s response to pressure from the United States to stop buying Russian oil, after Trump doubled tariffs on imports from India to as much as 50 per cent on Wednesday.
So far, India has defied the US and Russian oil exports to India are set to rise in September, traders said.
“The prevalent view is that Russian sanctions are not forthcoming, and India will ignore US sanction threats and continue buying Russian crude oil at heavily discounted prices,” PVM’s Varga said. REUTERS
