Oil prices fell on Tuesday as U.S. lawmakers prepared to wrangle over an economic stimulus package and investors worried about a rise in coronavirus cases worldwide.
Brent crude futures fell 19 cents, or 0.4 per cent, to settle at $43.22 a barrel, while U.S. West Texas Intermediate (WTI) crude futures fell 56 cents, or 1.4 per cent, to settle at $41.04 a barrel.
Brent is still on track for a fourth monthly rise, and U.S. crude is expected to gain for a third month.
U.S. Republicans on Monday unveiled a new coronavirus relief proposal hammered out with the White House, four days before millions of Americans lose expanded unemployment benefits. The package is facing opposition both from Democrats and from some Republicans, however.
“There’s concern with the stimulus out of Washington, which is critical to the oil complex and to supporting demand, especially for gasoline,” said John Kilduff, partner at Again Capital LLC in New York. Kilduff added that the longer the talks drag out, the more it will weigh on market sentiment.
Also a negative for prices, U.S. consumer confidence ebbed in July amid a flare-up in COVID-19 infections across the country. Cases worldwide have risen to around 16.57 million people.
Investors are awaiting the outcome of the U.S. Federal Reserve’s policy-setting panel meeting on Tuesday and Wednesday. The panel is expected to reiterate that interest rates will remain near zero for years to come.
This month, Brent crude has fallen deeper into contango <LCOc1-LCOc2>, a market structure in which the future price of the commodity is higher than the spot price, encouraging a build-up of inventories.
October prices were as much as 53 cents per barrel above September levels, compared with a 1 cent difference in early July.
“This suggests that the tightening we were seeing in the market has eased somewhat, with the demand outlook more uncertain given the resurgence of COVID-19 cases in some regions,” said Warren Patterson, ING’s head of commodities strategy.
U.S. crude inventories fell by 6.8 million barrels in the week to July 24 to 531 million barrels, data from industry group the American Petroleum Institute showed on Tuesday, compared with analysts’ expectations for a build of 357,000 barrels. U.S. government data is due Wednesday.
Elsewhere, Indian refiners are cutting crude processing and shutting units for maintenance as local fuel demand falls and global refining margins are weak, officials at the companies said.
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