Oil fell to near $41 a barrel as U.S. jobs figures beat expectations, lifting the dollar, and crude was headed for a weekly drop as demand concerns cloud the market outlook.
Futures in New York fell 0.9% after America added 1.37 million jobs in August. The oil market is still struggling with a slow recovery in consumption while higher supply from OPEC and its allies is starting to kick in. Russia’s energy minister said demand has returned to 90% of pre-covid levels, but limited travel and work from home arrangements are slowing down the recovery.
Crude has got off to a weak start in September with many countries still fighting to contain the coronavirus. Positive employment figures out of the U.S. may spur hope that the demand recovery will continue, though oil products markets remain weak, suggesting end-user consumption is still poor.
“In WTI, the return of $40 probably helped attracted some short covering, potentially signaling range-bound trading in the low-$40s,” said Ole Hansen, head of commodities strategy at Saxo Bank A/S.
West Texas Intermediate fell 35 cents to $41.02 a barrel as of 9:25 a.m. New York time
Brent for November settlement dropped 44 cents to $43.63The contract is down 3.2% this week
The diesel market is also weighing on the overall demand outlook. The fuel’s premium to Brent, a key metric used to gauge the market’s strength, plunged to the lowest in at least nine years due to stuttering consumption and a glut of supply. Diesel, used to power heavy industry such as agriculture and mining, as well as cars and trucks, is an important marker of economic health.