Futures Movers: Oil prices edge lower, extending drop after Fitch downgrade rattles markets

Oil futures were slightly lower early Thursday, extending a decline after a downgrade of the U.S. credit rating dented sentiment across markets, offsetting a record drop in U.S. crude inventories.

Price action
West Texas Intermediate crude for September delivery CL00, +0.36% CL.1, +0.36% CLU23, +0.36% was down 23 cents, or 0.3%, at $79.26 a barrel on the New York Mercantile Exchange.
October Brent crude BRN00, +0.25%, the global benchmark, fell 28 cents, or 0.3%, to $82.92 a barrel on ICE Futures Europe.
Market drivers
Brent and WTI slumped more than 2% Wednesday, logging their biggest one-day percentage drops since June 27 despite data that showed a record 17 million barrel decline in U.S. crude inventories last week.

Analysts blamed soft sentiment about economic prospects in the wake of Fitch’s late Tuesday downgrade of the U.S. credit rating and a bounce in the U.S. dollar DXY with sparking a selloff after crude had previously rallied to three-month highs on signs of tightening global supplies and rising expectations over the demand outlook.

“The timing for the downgrade was poor, if not unfortunate, with traders on vacation and away from their desks as markets are thin and remain susceptible to knee-jerk reactions to the news,” said Stephen Innes, managing partner at SPI Asset Management, in a note.

Investors were also looking ahead to Friday’s meeting of an OPEC+ panel, which isn’t expected to recommend any changes to the output policies of the group, made up of the Organization of the Petroleum Exporting Countries and its allies, including Russia.

Analysts also look for Saudi Arabia to announce it will extend its voluntary production cut of 1 million barrels a day, which took effect in July, through the end of September.

The Energy Information Administration is expected Thursday to report an 18-billion cubic feet (Bcf) injection to U.S. natural gas storage for the week ended July 28, according to a survey of analysts by S&P Global Commodity Insight.