Oil prices have not changed on Thursday. They struggled to hold onto five-month highs they reached in the previous session. It came as a result of worries on fuel demand since the second wave of the coronavirus infections outweighed US dollar declines.
WTI futures dropped 3 cents, or 0.1%, to trade at $42.16 a barrel. Meanwhile, Brent crude futures increased 6 cents to $45.23.
Crude oil prices saw significant gains after the report of the Energy Information Administration, about bigger than expected decline in US crude stockpiles.
However, at a time when the resurgence in the coronavirus cases was curbing the economic recovery in the United States, investors remained cautious of rising oil inventories.
EIA data revealed that distillate stockpiles, which include diesel and heating oil, surged to a 38 year high. Gasoline inventories surprisingly increased for a second week in a row.
ING Economics stated that it is challenging to get overly constructive towards the crude oil market. The commodity demand has faltered.
According to EIA calculations, gasoline demand remains approximately 8.6 million barrels per day. It is about 10% lower than the previous year. However, recent drops in the US dollar have supported higher oil prices. The commodity futures are priced in dollars, and it is good for oil, explained Stephen Innes, a market strategist at AxiCorp.
US Dollar experienced the most significant drop in a decade against six currencies in July. Analysts forecast further drops next year.
Saudi Arabia lost $12 billion due to declining oil exports
Saudi Arabia saturated the market with its oil exports in April 2020. However, a sharp drop in oil prices cost the country $12 billion. The value of Saudi oil exports in April decreased by 4.65 percent compared to the same period in 2019.
The share of Saudi oil exports decreased by 7.64 compared to the previous year. The value of Saudi exports to its most important customer, China, as of April 2020 was equivalent to $9.1 billion (16.7 billion rials).
Saudi oil exports dropped by 23.10 million barrels per day in early April, compared to 39.7 million barrels per day in March. Saudi Arabia’s oil production was reduced to 5.8 million barrels per day in May, June, and July, following the OPEC Plus deal. It resulted in limited exports with some Asian customers.
Although oil prices have now strengthened since April, overall, the drop in exports has hit Saudi oil revenues. According to a recent forecast by the International Monetary Fund, the Saudi economy will shrink by 8.6% this year. Analysts think it is the main reason for the country’s economic decline.
According to experts, the dynamic regulation of supply and demand in international markets will be the key to positive or negative price changes in the future. These settings will depend on the dynamics of demand, the economy, the supply of OPEC and non-OPEC oil, and oil production.
The US Energy Information Administration, EIA, forecast that global oil demand will increase in 2021.