Energy Report: Demand Fear Funk

The oil market can't shake its demand fear funk even though U.S.oil supply continues to tighten. The Energy Information Administration (EIA) reported a surprise 2.0 million barrel drop in crude supply as refiners crept back from their decline. Yet while refiners came back, lingering demand concerns makes the market less concerned about the trend of tightening supply.

Rising hopes for a COVID-19 relief package that would, of course, help domestic gasoline demand seemed thwarted after Senator Mitch McConnell said that the two sides were still far apart. Nevertheless, the talks between House Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin continues. Perhaps there is a deal to be had, and if it happens, oil and products should get swept away in a flurry of risk-on buying. President Donald Trump signed stop-gap spending legislation to avoid a government shutdown, which should be a positive sign.

Another positive sign for global demand comes out of India. Reuters reported that "Indian state refiners' annual gasoline sales rose to pre-COVID levels in September. A fall in diesel sales slowed, as the loosening of lockdown restrictions boosted energy consumption and economic activity, provisional industry data showed. Last month, gasoline sales by state refiners saw their first annual growth since March, underpinned by a gradual lifting of coronavirus curbs even as India suffers one of the highest infection rates in the world.

India's fuel consumption - a proxy for oil demand - was hard hit by a nation-wide lockdown imposed in March to stem the spread of COVID-19. Indian state retailers sold 2.2 million tonnes of gasoline last month, up 1.85% from a year ago as the sale of passenger cars surged. Motorists are increasingly relying on personal vehicles to commute amid rising coronavirus cases. Gasoline sales were up 10.5% from August. Gasoil sales were at 4.84 million tonnes, down 7.3% from a year ago but up 22% from August, according to data provided by the country's top refiner Indian Oil.

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Moon Kil Woong 7 months ago Contributor's comment

The jump in natural gas is good but it still has a ways to go given it has fallen so hard.

Sheryl Morris 7 months ago Member's comment

What kind of timeframe do you think we are looking at before it rebounds?

Moon Kil Woong 7 months ago Contributor's comment

Asian demand is good. It all depends on the Covid issue being solved. I'm hoping a therapeutic will keep most people out of the emergency room like CYDY but that also seems slow and the company chose to get approval for critical and severe patients over mild to moderate due to the amount of time it would take with the FDA. This may be a while as well even if Trump gets some.