Crude oil plunges on gasoline demand destruction

According to media sources, global oil benchmarks decreased by around 5.6% on Wednesday, responding to weaker US economic data as well as a significant build in gasoline inventories.

Brent crude oil settled $5.11 lower at $85.81/bbl, while WTI crude settled down by $5.01 at $84.22/bbl on Wednesday, lowest settlement levels since late August this year.

U.S. Energy Information Administration (EIA) data shows that US gasoline demand fell to 8 million barrels/day last week, its lowest level since the beginning of this year. According to JP Morgan, US gasoline consumption is seasonally at its lowest level in 22 years.

This big slump in gasoline demand is attributed to the 30% spike in fuel prices in the third quarter of this year. Plus, there were torrential rains ensued by floods across New York and the northeast regions, weighing heavily on consumption. All resulted in an increase of 6.5 million barrels in gasoline stocks, blowing past expectations of a 200,000-barrel rise.

Economic news also pressured oil prices. Growth in the US services sector slowed in September, data showed.On the other hand, crude oil prices managed to recover a small portion of their losses during the intraday session on Thursday as OPEC+ announced that they will maintain their oil output cuts to ensure tight supply for the year-end. However, gloomy demand outlook and weak economic data outweighed this and kept increases under control.

During intraday sessions on Thursday, NYMEX was trading up by 0.66% at $84.78/bbl, while Brent oil was also trading 0.66% higher at $86.38/bbl. However, even this marginal recovery could not be sustained long, as they again fell slightly below Wednesday’s settlements at the time of press.