Oil prices extend rapid slide on demand worries

HOUSTON, Oct 5 (Reuters) – Oil prices fell about 2% on Thursday, extending the previous session’s losses of nearly 6%, as worries about fuel demand outweighed an OPEC+ decision to maintain oil output cuts, keeping supply tight.

Global benchmark Brent crude futures and U.S. West Texas Intermediate crude futures have declined about $10 a barrel in less than 10 days after edging close to $100 in late September.

The combined percentage drop over the last two days was the steepest since May for both crude benchmarks.

Brent futures settled $1.74, or 2.03%, lower at $84.07, while U.S. West Texas Intermediate crude futures were $1.91, or 2.3%, lower at $82.31.

Investors are worried that peak demand for fuel consumption is behind us, said Dennis Kissler, senior vice president of trading at BOK Financial.

Oil settled more than $5 lower on Wednesday – its biggest daily drop in over a year, even after a meeting of a ministerial panel of OPEC+, the Organization of the Petroleum Exporting Countries and allies led by Russia.

It made no changes to the group’s oil output policy, and Saudi Arabia said it would maintain a voluntary cut of 1 million barrels per day (bpd) until the end of 2023, while Russia would keep a 300,000 bpd voluntary export curb until the end of December.

Close-to-close volatility on Brent was at its highest since May, while that on WTI was its highest since June.

“This is typical speculative trading activity – trying to make the best out of a bad situation after the bloodbath on Wednesday, and they (market participants) are trying to pick the bottom,” said Bob Yawger, director of energy futures at Mizuho.

Long positions established in anticipation of $100 a barrel are being liquidated, said Andy Lipow, president of Lipow Oil Associates LLC.

Government data on Wednesday also showed a sharp decline in U.S. gasoline demand. Finished motor gasoline supplied, a proxy for demand, fell last week to its lowest since the start of this year.

“I don’t see gasoline demand getting much above 8.5 million barrels a day until the holiday shopping season kicks in and that’s going to be a problem for the market,” said John Kilduff, partner at Again Capital LLC in New York.

U.S. heating oil futures fell more than 5% on expectations that a Russian fuel export ban introduced last month would be lifted soon and supply disruptions would be less severe than markets had anticipated.

Data on Wednesday also showed the U.S. services sector slowed while the euro zone economy probably shrank last quarter, according to a survey.

The U.S. dollar eased, but continued to remain near 11-month highs, making crude more expensive for foreign buyers.

On Thursday, the Turkish energy minister said a crude oil pipeline from Iraq through Turkey, which has been suspended for about six months, was ready for operations.

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