Oil was down on Wednesday morning in Asia, continuing major overnight losses. Oversupply fears were the main driver of the fall, with U.S. refineries beginning to shed labor.
Brent oil futures slid 1.13% to $41.09 by 11:29 AM ET (3:29 AM GMT) and WTI futures were down 0.94% to $38.92.
Heavy falls in the previous trading session continued to drag on the Asian markets in morning trade; WTI futures fell back below the $40 mark, with both benchmarks losing more than 3%. The major drivers were poor economic forecasts for future consumption amid the COVID-19 pandemic and continued oversupply issues.
Heads of major energy trading companies were downbeat about future oil prices, with low expectations of future demand and little movement in price expected for at least months, and possibly years. “It is important to keep in mind that moves to the downside have the potential to be supersized,” given the COVID-19 pandemic’s continued spread and ongoing global oversupply issues, Bob Yawger, director of energy futures at Mizuho, told Reuters.
In signs of a protracted oversupply problem, U.S. refineries are beginning to lay off workers, with Marathon Petroleum Corp , the U.S.’ largest refiner, looking to widespread job cuts to help maintain their 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.
Refineries globally are feeling the pressure of a hugely depressed global air travel industry, with many refineries attempting to blend their excess jet fuel into other products and some installations looking likely to face shutdown.
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.
The uncertainty over U.S. presidential elections is also cause for concern, with President Donald Trump refusing to guarantee a peaceful transition of power should he be ousted. The first presidential election debate was earlier this morning and was highly combative.
The global death toll from the COVID-19 pandemic passed 1 million earlier in the week, and case numbers continue to rise, further threatening global economic recovery.
Investors now await crude oil supply data from the U.S. Energy Information Administration (EIA), due later in the day.