Oil futures settled lower at the beginning of the week, as a slumping U.S. stock market fed concerns that the outlook for energy demand will continue to soften.
Prices, however, pared some of their losses by the settlement as petroleum-products futures took a last minute turn higher following a report that Colonial Pipeline Co. has shutdown petroleum-product pipelines. The October contract for West Texas Intermediate crude settled at $45.83 a barrel on the New York Mercantile Exchange, down 85 cents, or 1.8%, on its expiration day. November crude, fell 60 cents, or 1.3%, to $46.36 a barrel.
Meanwhile, November Brent crude on London’s ICE Futures exchange, [which is priced as US] +0.59% turned a bit higher, up 16 cents, or 0.3%, to settle at $49.08 a barrel.
Last week’s decision by the Federal Reserve to leave interest rates unchanged rattled investor confidence over the state of the U.S. economy and, in turn, the outlook for energy demand. U.S. equities, meanwhile, traded sharply lower Tuesday, following losses in Europe. Analysts polled by Platts forecast a weekly decline of 700,000 barrels in crude supplies.
The oil market is also seriously concerned about an economic slowdown in China, which is currently dragging key commodities like crude oil and base metals down and China has accumulated about 200 million barrels of crude in its reserve so far and aims to have 500 million by the end of the decade, according to the International Energy Agency. It’s currently filling a 19 million-barrel facility at Huangdao and will add oil at six sites with a combined capacity of about 132 million barrels over the next 18 months, the Paris-based adviser on energy policy estimates.
This does not bode well.