Adedapo Adesanya
By Adedapo Adesanya
The oil market was bearish on Wednesday on news that the United States President, Mr Donald Trump, has dashed hopes for another stimulus package to boost the coronavirus-hit economy as data showed that crude inventories also rose last week.
The international benchmark futures, Brent crude, fell by 1.38 per cent or 59 cents to trade at $42.66 per barrel while the US benchmark West Texas Intermediate (WTI) crude futures dropped by 1.67 per cent or 68 cents to $39.99 per barrel.
President Trump said he would end negotiations on a new fiscal stimulus package, dampening hopes that Washington lawmakers could strike a deal soon and the market was depressed by the news.
He told his team to stop negotiating with congressional Democrats on the stimulus package until after the November election. He said he disagreed with House Speaker Nancy Pelosi over money to states and that he planned to pass a major Stimulus Bill if he wins against Joe Biden, his Democratic counterpart.
Mr Trump’s pulling out of relief negotiations signals a lot of uncertainty about the country’s economy.
At the previous session, the commodity had witnessed a sharp climb as investors focused on the possibility of the deal, a strike that’s curtailed Norwegian output and Hurricane Delta, which has led to production disruptions in the Gulf of Mexico.
But at the midweek, a larger-than-expected build in US crude inventories added to worries. Crude inventories rose by 501,000 barrels in the week to October 2 to 492.9 million barrels, according to the Energy Information Administration (EIA).
Meanwhile, in Norway, one of its labour union said on Tuesday that it will expand oil strike from October 10 unless a wage deal can be reached. Six offshore oil and gas fields have been shut down because of the strike, cutting Norway’s output capacity by 8 per cent. This could, however, help prop up prices in coming days.
In addition, Hurricane Delta has threatened US oil output in the Gulf of Mexico and could help prices appreciate in coming days.
The storm has shut 29 per cent of offshore oil production in the Gulf, which accounts for 17 per cent of total U.S crude output. Aside from oil output, the region’s offshore production accounts for 5 per cent of domestic dry natural-gas production. It is also home to more than 45 per cent of total domestic refining capacity and 51 per cent of the nation’s natural-gas processing plant capacity.
