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Oil extends drop as US slowdown concerns eclipse stockpile draw
Oil retreated for the third time in four days as further signs of a US slowdown overshadowed a substantial draw in crude stockpiles.
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Global benchmark Brent dropped below $83 a barrel after closing 2 percent lower on Wednesday.
The US economy stalled in recent weeks, the Federal Reserve said in its Beige Book survey, casting a cloud over prospects for energy demand. The dollar has also ticked higher, providing another headwind for commodities.
In Asia, meanwhile, gasoline markets are showing signs of weakness as profits from producing the fuel slump.
Diesel is also lagging, with some refiners considering cuts to processing as margins decline. That’s weighing on prices of crude grades like Murban, which briefly traded in a bearish contango structure.
Despite this week’s pullback, crude is still up from a 15-month low reached in mid-March following turmoil in the banking sector.
A surprise announcement by OPEC+ on production cuts and curbed Iraqi flows have underpinned some of the gains, with expectations of a rebound in Chinese demand also supportive.
“When the Fed’s commentary indicates further rate hikes, economic troubles look inevitable,” said Priyanka Sachdeva, an analyst at brokerage Phillip Nova Pte Ltd.
“The only ray of hope here is China’s reemergence, which is expected to be significant enough to outweigh the dented demand from the West.”
The concerns over slowing US growth eclipsed a broadly bullish report from the Energy Information Administration that showed crude stockpiles fell 4.58 million barrels last week.
Refineries operated above 91 percent of capacity for the first time since December, although gasoline inventories expanded.
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