Oil prices extend losses as demand concerns outweigh tight supply

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Oil prices fell on Thursday for a second straight session, as demand concerns outweighed tight global supply after U.S. government data showed tepid gasoline consumption during the peak summer driving season.

Brent crude futures dropped 33 cents, or 0.3%, to $106.59 a barrel by 0618 GMT after slipping 0.4% in the previous session. U.S. West Texas Intermediate crude futures fell 48 cents, or 0.5%, to $99.40 a barrel following a 1.9% drop on Wednesday.

Oil prices have been volatile as traders have had to square tighter global supply because of the loss of Russian barrels following the country's invasion of Ukraine, with recessionary worries that could weaken energy demand.

U.S. gasoline inventories (USOILG=ECI) rose 3.5 million barrels last week, government data showed on Wednesday, far exceeding analysts' forecasts in a Reuters poll for a 71,000-barrel rise.

Product supplied of gasoline - a proxy for demand - was about 8.5 million barrels per day, or about 7.6% lower than the same time a year ago, the data showed.

"We are in the peak of the peak driving season and demand for gasoline is lagging," said Stephen Schork, principal at The Schork Report.

ING's head of commodities research Warren Patterson said the U.S. inventory data was relatively bearish as gasoline stocks rose despite lower refinery runs over the week.

"It seems higher prices are having some impact on demand, with gasoline demand seasonally low over the week once again," he added.

Concerns over Libya's supplies have also eased as the National Oil Corp (NOC) said on Wednesday crude production had resumed at several oilfields, after lifting force majeure on oil exports last week.

Still, one of Canada's major oil export arteries, the Keystone pipeline, was operating at reduced rates for a third day on Wednesday, operator TC Energy said in a statement, as repairs continued on a third-party power facility in South Dakota. read more

"We expect Brent oil futures to fall to US$100/bbl by Q4 2022, implying a modest fall from current levels," Commonwealth Bank commodities analyst Vivek Dhar said in a note.



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