Futures Movers: Oil prices edge lower on demand worries; Brent set for weekly decline

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Oil futures traded lower Friday, under pressure from continued worries over prospects for demand as the COVID-19 pandemic undermines economic growth.

West Texas Intermediate crude for October delivery CLV20, -1.07% CL00, -1.07% was down 50 cents, or 1.2%, at $42.32 a gallon on the New York Mercantile Exchange, while the global benchmark, October Brent crude BRNV20, -1.02% declined 48 cents, or 1.1%, to $44.42 a barrel on ICE Futures Europe. WTI was still on track for a weekly gain of 0.8%, while Brent was headed for a 0.8% decline.

Eurozone purchasing managers index readings Friday showed a slowdown in the region’s economic activity, while data out of Japan indicated a continued decline in activity. Meanwhile, a renewed rise in COVID-19 cases in parts of Europe and elsewhere have underlined worries about the outlook for energy demand.

In Asia, a cutback in refining activity in response to poor fuel demand is a troubling sign, analysts said.

“Simply put, demand for crude has waned over the past month. Firm refinery run rates paired with an increased amount of refined product output and weak end use demand leads to an excess of gasoline and diesel being exported or dumped onto the open market,” said Michael Tran, analyst at RBC Capital Markets, in a note.

“This pattern crushes regional refinery margins, which can result in lower refinery run rates and crude demand destruction,” he said, noting that Asian margins are a leading market indicator heading into fall and the end of the summer driving season. Crack spreads — the difference between the price of crude and the petroleum products refined from it — “will not improve until either demand leads the way or run cuts curtail output,” he said.

September natural-gas futures NGU20, -1.74% fell 0.9% to $2.33 per million British thermal units.

September gasoline RBU20, -0.52% was down 0.9% at $1.2852 a gallon, while September heating oil HOU20, -1.32% was off 1.4% at $1.2298 a gallon.