Oil prices decline on high inventories, weak U.S. stock markets

Oil Set for First Consecutive Weekly Loss for Months

Oil prices fell further on Friday and were on track for a second weekly drop after the USA stock markets tumbled and U.S. stockpiles rose unexpectedly.

"Crude production is starting to return following a couple of storms, but a weak demand outlook and the start of maintenance season will keep the pressure on oil prices", OANDA senior market analyst Edward Moya told. United States crude was up 42 cents, or 1.1%, at $37.72 a barrel.

Brent LCOc1 ended the session down 23 cents, or 0.6%, at $39.83 a barrel while USA crude CLc1 settled up 3 cents at $37.33 a barrel.

Oil recovered from an oversell Tuesday, said Gary Cunningham, director of market research at Tradition Energy.

Both major benchmarks are down around 6.5 per cent for the week and headed for a second week of declines, as hopes dim for a steady recovery in fuel demand amid signs of second-wave coronavirus outbreaks.

Money managers cut their net long US crude futures and options positions in the most recent week, a sign hedge fund managers expect further weakness in the oil markets.

"The financial markets are continuing to set the tone, including on the oil market", said Eugen Weinberg, head of commodities strategy at Commerzbank AG.

Also dampening the market mood, the USA senate killed a Republican bill that would have provided around $300 billion (Dh1.1 trillion) in new coronavirus aid.

The price of oil has slipped below the $40 mark to trade at its lowest level since June, and crude prices may continue to weaken in September as the Organization of the Petroleum Exporting Countries (OPEC) rollback the voluntary production cuts in response to COVID-19.

The rising stockpiles come ahead of a meeting on September 17 of the market monitoring panel of the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russian Federation, together known as OPEC+, which in August trimmed supply curbs from earlier this year on expectations demand would improve.

"Despite the recent slide in oil prices, we think that the OPEC+ leadership will continue to direct its efforts towards securing better compliance rather than pushing for deeper cuts at this stage", RBC analysts said.

Following Saudi Arabia, Kuwait also lowered its official selling price to Asia for October, to counter slower demand.



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