Crude oil prices dropped lower at Asia’s trading session on Wednesday. The price plunge in the hydrocarbon commodity is attributed to oversupply fears, as U.S. refineries are beginning to shed labor force.
Brent oil futures dropped 1.17% to $40.55 by 4.57 GMT and WTI futures were down 0.78% to $38.98.
Significant sell-offs in Tuesday’s trading session continued to weigh down today’s trading session, as West Texas Intermediate dropped below $40/barrel, with both major crude oil benchmarks losing more than 3% in the past two days.
The major catalysts driving the price of crude include poor economic forecasts for future demand amid the COVID-19 pandemic and continued fears that the oil market is saturated.
Data from the American Petroleum Institute (API) on Tuesday showed a draw of 831,000 barrels, as against an expected build of 1.4 million barrels, for the week ending Sept. 25, and following the previous week’s build of 691,000 barrels.
However, this was insufficient to hold back the fall in prices.
Also, Marathon Petroleum Corp, the biggest refiner in U.S., is considering widespread job cuts in helping its bottom line. Marathon officials are “communicating with our employees about measures we announced earlier this year to strengthen Marathon Petroleum for short-term and long-term success,” a spokeswoman said in a statement, according to Reuters.
Stephen Innes, Chief Global Market Strategist at AxiCorp, also gave insights on the oversupply fears prevailing in the energy market, by saying:
“Oil futures fell precipitously on Wednesday amid mounting fears the oil demand recovery in the United States, the world’s biggest oil consumer, could slow due to Covid-19 cases’ resurgence in New York, which could lead to stricter mobility restrictions in the economic powerhouse North Eastern corridor.
“Oil pared some of the losses after the American Petroleum Institute (API) reported a decline in the domestic crude stockpiles, which could temporarily bandage over the oil price hemorrhaging.”
However, the oil complex will remain super sensitive to any adverse healthcare or lockdown headline concerns.