Oil steady as US stimulus hopes countered by demand concerns

US fiscal package deadlocked in talks between Democrats and Republicans

LONDON:

Oil prices were steady on Tuesday, with demand worries due to a rise in coronavirus cases worldwide undermining support coming from hopes for additional US economic stimulus measures.

Brent crude was up $0.07, or 0.2%, at $43.48 a barrel at 1052 GMT, while the US West Texas Intermediate (WTI) fell $0.19, or 0.5%, to $41.41 a barrel.

“Oil continues to trade in a range with its supply fundamentals helping to set a floor while the economic and demand outlook is providing the cap,” said Harry Tchilinguirian, Head of Commodity Research at BNP Paribas.

A big US fiscal package that could boost oil prices was deadlocked in talks between Democrats, who made a $3-trillion proposal, and Republicans, who had a $1-trillion plan.

Traders are also before the US 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.

Brent crude was deeper in contango, a market structure in which the future price of the commodity is higher than the spot price, encouraging a build-up of inventories.

September prices were as much as $0.49 per barrel below October, compared to $0.01 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.

US inventory data may show refined product stockpiles declined last week, while crude oil stockpiles are expected to have held steady, five analysts polled by Reuters estimated.

On the downside for fuel demand, Europe’s largest low-cost airline Ryanair cut its annual passenger target on Monday by a quarter and warned that a resurgence in coronavirus infections could lower that further.