Oil declined from a five-month high in New York with the U.S. Federal Reserve and OPEC+ sounding caution on the demand recovery as many countries struggle to contain the coronavirus.
Futures fell 0.8% to below $43 a barrel amid a broader slide in equities after minutes from the Fed said the pandemic would weigh heavily on economic activity, repeating its view that the recovery would depend on containment of the virus. 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 outbreak, while also urging laggards to adhere to their output pledges.
Oil has inched higher recently after a rally stalled in June, but is struggling to push past $43 a barrel as surging infections raise doubts about a sustained recovery in consumption. Prices have also closely followed the dollar this month, with the U.S. currency strengthening after the release of the Fed minutes, making commodities such as crude less attractive for investors.
“The risk-off environment and stronger dollar are not helping crude oil,” said Giovanni Staunovo, commodity analyst at UBS Group AG. The OPEC+ warnings on “a fragile oil market and uncertainty on the oil demand recovery” have also contributed to the slide, he said.
West Texas Intermediate for October fell 0.9% to $42.74 at 8:44 a.m. new York time; the September contract, which dropped 0.8% to $42.58, expires Thursday
Brent for October settlement lost 0.9% to $44.96
Brent’s six-month timespread was at a contango of $2.44 a barrel, compared with $1.77 at the end of July, signaling concerns about over-supply
The limited return of consumption by refiners was underscored by data from India showing its crude imports fell last month to the lowest in records going back to 2011.
Asia’s second-largest importer has continued to struggle with the coronavirus and also filled up its strategic reserves when crude prices plunged earlier in the year.
A big focus of the OPEC+ meeting was ensuring nations that didn’t live up to their promises in previous months make amends in August and September. Nigeria, Iraq and other laggards were given until Aug. 28 to come up with a detailed plan for their compensation cuts, according to a communique.