By Geoffrey Smith
Investing.com — Oil prices tumbled on Friday, pulled down by extended selling of stocks in what signalled an abrupt end to the summer rally in risk assets.
By 11 AM ET (1500 GMT). U.S. crude futures were down 3.9% at $39.93 a barrel, breaking below $40 for the first time in over a month. Brent futures, the international benchmark, were down 3.2% at $42.69.
Gasoline RBOB Futures were also at a one-month low after falling 3.4% to $1.169 a gallon.
U.S. drivers are on course to see the lowest prices for the Labor Day weekend since 2004, thanks to the flattening out of demand in recent weeks and the sustained high stockpiles weighing on the market. Those stockpiles have crushed refining margins around the world, with Gulf Coast margins falling to below $3 a barrel from around $12 at the start of the year, according to Platts data.
Figures from Pay with GasBuddy data show gasoline demand peaked in the U.S. the second week of August and has declined every week since then. Figures released earlier showing a continued if gradual recovery in the U.S. labor market appeared unlikely to change that trend in the near future.
However, policymakers in key producer nations were keen to look through the short-term weakness in prices and focus on a recovery in demand which they see extending well into 2021. Russian Energy Minister Alexander Novak was quoted by newswires as saying he expected oil to trade chiefly in a range between $50 and $55 a barrel next year, with spikes as far as $60 possible.
He noted, without apparent irony, that the OPEC+ group of nations “have all the tools necessary to avoid market overheating”.
Later in the day, Baker Hughes will release its weekly count of active U.S. oil rigs. The number has bottomed out in recent weeks after falling by over three quarters since the start of the year.
Crude Oil Falls, Dragged Down by Stocks; WTI Dips Below $40
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