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Oil prices tumbled today amid growing concerns of less stimulus and COVID second-wave fears driving expectations for less demand amid rising supply (overwhelming any Armenia-regional war premia). WTI tumbled back below $40 intraday.

“If they were to put new restrictions on areas of New York, that would surprise the market a little bit and knock it down,” said Michael Hiley, head of over-the-counter energy trading at New York-based LPS Futures.

Last week’s surprisingly large draws in gasoline and distillates will be closely watched this week…

API

• Crude -831k (+1.9mm exp)

• Cushing +1.61mm

• Gasoline +1.623mm (-1.3mm exp)

• Distillates -3.424mm (-1.7mm exp)

Another surprise crude draw last week according to API data but a surprise gasoline product build offset some of the excitement…

Source: Bloomberg

The sell-off in equities, “which have been propping up oil prices recently, is exposing the oil markets’ weak fundamental backdrop,” said Ryan Fitzmaurice, commodities strategist at Rabobank.

The Covid-19 situation continues to weigh on the market, as “Europe has seen notable uptick in virus cases recently and even New York has seen cases rise just ahead of the start of the scheduled indoor dining restart tomorrow.”

WTI was hovering around $39 ahead of the API data and bounced modestly on the data…

We do note that the clashes between Armenia and Azerbaijan have “kept markets on edge,” as an escalation in the conflict “could affect oil and gas exports from Azerbaijan,” said analysts at ICICI Bank.

Amid all this, Bloomberg reports that the chorus of downbeat oil demand predictions continued to grow. Three of the world’s biggest independent oil traders said consumption won’t meaningfully recover for at least another 18 months. That comes as Total SE said demand growth will end around 2030 and Pierre Andurand, chief investment officer and founder of Andurand Capital Management LLP, called for demand to peak in 2026.