Oil prices drop as concerns mount over next U.S. stimulus round

By Andres Guerra Luz and Alex Longley on 10/1/2020

(Bloomberg) --Oil accelerated losses as uncertainty over progress on another round of U.S. fiscal relief added to supply concerns with OPEC+ raising output.

Futures in New York tumbled as much as nearly 6% on Thursday as U.S. equities pared gains and the dollar moved off its session lows. A Politico report that House leader Nancy Pelosi was skeptical about reaching a deal reined in hopes of the U.S. government providing a much needed boost to demand.

Weighing on the supply side, the market is dealing with the unexpected return of Libyan output, with exports at an eight-month high as ports open. September data also show higher oil exports from Saudi Arabia and Iraq. At the same time, Russian exports are also expected to increase.

“Sentiment continues to be weighed down by the macro outlook,” said Harry Tchilinguirian, head of commodities strategy at BNP Paribas SA. “This is notably the case in the U.S., where there remains considerable uncertainty as to whether a fourth round of fiscal stimulus will be passed or not before the presidential election.”

The emerging supply concerns come at a bad time for the oil market, which is facing new demand worries amid flareups in the coronavirus outbreak around the world. In the U.K., car usage slumped last week amid new virus restrictions. Meanwhile, Europe’s oil refineries are struggling to cope with a diesel glut, limiting their prospects for extra crude buying.

“This market can’t handle any additional barrels, and that’s what it seems to be getting,” said John Kilduff, a partner at Again Capital LLC. “With the demand situation still being poor, the downward pressure persists.”

Prices:

  • West Texas Intermediate for November delivery fell $2.25 to $37.97 a barrel at 10:23 a.m. in New York
  • Brent for December settlement fell $2.09 to $40.21 a barrel

As the market has stabilized in recent weeks, so have speculative flows into crude. Eleven of the largest ETFs in the market together withdrew $293 million in September, according to data compiled by Bloomberg. Though that’s a fourth consecutive month of outflows, it’s also the smallest of the four.

Other oil-market news:

  • Exxon Mobil Corp. gave a glimpse Thursday of its third-quarter financial performance that includes a worsening picture at its oil-refining business and further losses for the energy giant’s upstream unit.
  • Four Singapore-based crude oil traders from BP Plc left the company after the conclusion of internal investigations into their involvement in several disputed deals, said people with knowledge of the situation.

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