Oil holds steady on hopes for US stimulus agreement

Oil prices were little changed in early trade on Thursday after US lawmakers postponed a vote on a $2.2 trillion coronavirus relief package in hopes of reaching a bipartisan deal, while rising infections fuelled demand fears.

US West Texas Intermediate (WTI) crude futures slipped 1 cent to $40.21 a barrel at 0146 GMT, after jumping 2.4 per cent on Wednesday.

Brent crude futures rose 3 cents to $42.33 a barrel, after falling 0.2 per cent overnight.

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US Treasury Secretary Steven Mnuchin said talks with House Speaker Nancy Pelosi made progress on Covid-19 relief legislation.

WTI jumped on Wednesday after data from the US Energy Information Administration showed crude stocks and distillate inventories, which include diesel and jet fuel, fell more than expected in the latest week.

But demand worries remain. Concerns are growing in New York, where Covid-19 infection rates continued to climb. The pandemic has infected more than 7.2 million and killed more than 2,06,000 people in the United States.

Growing supply from the Organization of the Petroleum Exporting Countries (OPEC) also weighed on the market, with output having risen by 1,60,000 barrels per day in September from August as some Libyan installations restarted and Iran's exports grew, a Reuters survey found.

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ANZ Research noted reports of Russia increasing production beyond its quota within the grouping of OPEC and its allies, called OPEC+, which has worked since April to curb crude supply.

"Increasing supplies from OPEC+ will be risking their rebalancing effort as the market is still grappling with weak demand," ANZ Research said.

In a Reuters survey, 40 analysts and economists now see global demand contracting by 8 million-9.8 million bpd (barrels per day) this year, slightly less bleak than the 8 million-10 million bpd consensus last month.

However, they trimmed their outlook for oil prices this year, with the average of forecasts for benchmark Brent crude at $42.48 a barrel for 2020 down from an average forecast of $42.75 last month.

The 2020 US crude price outlook was at $38.70 per barrel versus $38.82 predicted in August.