Oil fell further after closing at a three-month low as a forecast drop in U.S. gasoline consumption added to a growing array of indicators suggesting the demand outlook is worsening.

West Texas Intermediate was below US$77 a barrel after declining 4.3 per cent on Tuesday. American gasoline demand will drop to a 20-year low next year on a per-capita basis, according to a US government report, with prices at the pump and inflation likely causing a reduction in discretionary driving. Global equities were also down with investors on edge ahead of more comments from the U.S. Federal Reserve. 

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Oil has fallen sharply over the last three weeks as the Israel-Hamas war-risk premium faded and the demand outlook deteriorated. There are worries over the state of the economy in China, the world's biggest importer, and fresh doubts on whether the U.S. Fed has finished tightening. On the supply front, Russian shipments are running near a four-month high, while industry data showed U.S. crude stockpiles increased by almost 12 million barrels last week.

The growing bearishness is also being reflected in the futures curve. WTI's prompt timespread is now just eight cents a barrel in backwardation, a bullish structure where near-term cargoes are more expensive than later-dated ones. That's down from more than US$1 in backwardation on Oct. 23.  

“Oil bulls are in distress,” said Ehsan Khoman, head of commodities research at MUFG. “The mood music has pivoted from pricing in geopolitics-induced supply-side risk premiums back to pricing in demand-side risk discounts.”   

Prices:

  • WTI for December delivery fell 1 per cent to US$76.62 a barrel at 10:26 a.m. in London.
  • Brent for January settlement was was 0.9 per cent lower at US$80.90

Crude inventories at the key hub in Cushing, Oklahoma, increased by 1.1 million barrels last week, the industry-funded American Petroleum Institute reported Tuesday, according to a person familiar. That would be the biggest rise since June if confirmed. The Energy Information Administration won't publish official data on Wednesday, releasing two weeks' worth on Nov. 15. 

However, OPEC+ said it was still positive on the demand outlook as it prepares for its next ministerial meeting. Saudi Arabia and Russia may decide whether to extend voluntary supply cuts into 2024 at the gathering in the final weekend of November.