Oil prices declined today as US President Donald Trump halted negotiations on a new stimulus bill that would support the Covid-19 hit economy, while US crude stocks also increased.
Rystad Energy’s Head of Oil Markets, Bjornar Tonhaugen, has commented on the day's developments:
"Today’s oil price move has Donald Trump’s name written all over it. And it’s a bizarre day as Donald-Trump-related news sit on both sides of the scale.
On the positive side, Trump’s return to office relieved market concerns and dissolved a shadow of instability that was created during his time in hospital.
On the negative side, the US President’s decision to end negotiations for a new stimulus bill that could relieve Covid-19-hit businesses, raised concerns about the economy’s overall recovery, and with it the recovery of the oil demand and consumption.
The negative news have prevailed this morning and prices are falling, a decline that is also assisted by a reported rise in US crude oil inventories.
While oil traders took a comfortable breath when the President returned to office, seemingly healed from the virus, it didn’t take long for them to gasp on his stimulus bill decision.
As the market was digesting the twist coming from the White House, API data came to put a cherry on the price-decline cake, showing a crude stocks build of nearly a million barrels of oil for last week.
Rising stocks are a concern, especially at a time that Libya’s production has returned, already rising to nearly 300,000 bpd and with more coming soon.
But even though prices decline today, things in the other side of the Atlantic have become more fragile, and could provide potential for an unexpected support to prices in days to come.
On the production side, labor strike outages in Norway have shut 8% of production. Additionally, in Azerbaijan a rocket allegedly came very close to strike the 1.2 million bpd BTC crude pipeline, which also sent shivers through the Med traders.
On the demand side, Covid-19 infections are rising in Europe at an alarming rate, with restrictions being reinstated in several countries. These developments are bad news for oil demand in the region.
And amid all the above, a surprise from the Middle East.
It’s surprising that this week Aramco decided to increase its official selling prices to Asia for November, as margins are terrible at the moment and refineries demanding crude may need to cut runs even further.
Maybe the Saudis already know something the market is yet to find out? When is that next OPEC meeting again? The balances are fragile and October could prove to be a turbulent month for oil."
Read the article online at: https://www.oilfieldtechnology.com/special-reports/07102020/oil-falls-as-trump-breaks-talks-on-stimulus-bill-while-us-stockpiles-increase/