Oil slips as demand worries offset hopes for stimulus

By Sonali Paul
MELBOURNE, Sept 29 (Reuters) - Oil prices fell on Tuesday as
demand concerns driven by COVID-19 outweighed hopes that U.S.
lawmakers and the White House were nearing an agreement on a new
stimulus package to revive the world's biggest economy.
U.S. West Texas Intermediate (WTI) crude CLc1 futures
slipped 17 cents, or 0.4%, to $40.43 at 0120 GMT, while Brent
crude LCOc1 futures also fell 17 cents, or 0.4%, to $42.26 a
barrel. Both benchmarks rose about 1% on Monday.
Commodities markets had crept up in earlier trade as
Democratic lawmakers unveiled a new $2.2 trillion coronavirus
relief bill, which U.S. House of Representatives Speaker Nancy
Pelosi said was a compromise measure. "If it happens, the U.S. stimulus checks will go a long way
to shoring up U.S. oil demand at a most critical juncture and
could move oil prices back into a pre-September frame of mind,"
AxiCorp market strategist Stephen Innes said in a note.
Brent and WTI in August hit their highest levels since early
March on optimism over rising fuel demand and major oil
producers' strong compliance with promised supply cuts, but have
since dropped by about $3 on demand worries.
In the latest hit from a second wave of COVID-19, in Canada
the province of Quebec clamped down on bars and restaurants and
social gatherings in homes, while the most populous province,
Ontario, reported a new daily high of 700 cases.
In another negative demand sign, crude imports in August to
Japan, the world's fourth biggest consumer, slumped nearly 26%,
government data showed on Tuesday.
The market will be looking for signs of U.S. demand growth
in data due on Tuesday from the American Petroleum Institute and
the Energy Information Administration on Wednesday.
Five analysts polled by Reuters on average estimate U.S.
crude oil inventories rose by 1.4 million barrels in the week to
Sept. 25. They expect gasoline stockpiles fell by 1.6 million
barrels and distillate inventories, which include diesel and jet
fuel, fell by 800,000 barrels. On the supply side traders were keeping an eye on clashes
between Armenia and Azerbaijan over the Nagorno-Karabakh region.
If the conflict escalates it could affect oil and gas exports
from Azerbaijan, analysts said. Azerbaijan's main oil pipeline runs through Georgia to the
Turkish Mediterranean coast.