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Oil loses ground as uncertainty lingers over demand

Oil futures started the week on a soft note Monday, losing ground as worries lingered over prospects for crude demand as the global economy attempts to recover from the COVID-19 pandemic.

West Texas Intermediate crude of September delivery

on the New York Mercantile Exchange was off 10 cents, or 0.2%, at $41.91 a barrel. The global benchmark, October Brent crude
declined 17 cents, or 0.4%, to $44.63 a barrel on ICE Futures Europe.

October Brent’s discount to the November contract deepened Monday and stands at more than 40 cents. The contango, in which deferred contracts trade at a premium to nearby contracts, raises questions about how quickly the market is drawing down stocks, said Warren Patterson, head of commodities strategy at ING, in a note.

“Clearly the market is not tightening as quickly as initially anticipated. Demand is taking longer than expected to get back to normal levels,” he said, noting last week’s monthly reports from the Organization of the Petroleum Exporting Countries, or OPEC, and the International Energy Agency both cut forecasts for demand growth.

Oil ended higher last week, however, finding support after a further drawdown in U.S. crude inventories.

On the supply front, investors will be watching a meeting this week of the Joint Ministerial Monitoring Committee, the panel set up by OPEC and its allies, a group known as OPEC+, to monitor production. OPEC+ this month relaxed earlier output curbs, reducing output by 7.7 million barrels a day versus the reduction of 9.7 million barrels a day put in place in May.

Read:OPEC+ committee expected to take ‘wait-and-see’ approach on output as oil prices reflect ‘new normal’

September gasoline futures

rose 1.5% to $1.2626 a gallon, while September heating oil

was down 0.5% at $1.2305 a gallon.

September natural gas

was off less than 0.1% at $2.355 per million British thermal units.

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