LONDON – Oil prices dropped on Tuesday as Europe and the United States grappled with a surge in new coronavirus infections and investors remained cautious ahead of the first U.S. presidential debate.

Oil falls as virus cases mount and U.S. debate looms- oil and gas 360

Source: Reuters

Brent’s November contract LCOc1, which expires on Wednesday, fell 63 cents, or 1.5%, to $41.80 a barrel by 1342 GMT. The more active Brent crude contract for December LCOc2 fell 67 cents, or 1.6%, to $42.20.

U.S. West Texas Intermediate (WTI) crude CLc1 fell 81 cents, or 2%, to $39.79.

More than one million people worldwide have died from COVID-19, according to a Reuters tally, a bleak milestone in a pandemic that has devastated the global economy and demand for fuel.

“Rising numbers of new corona cases in the United States and Europe are limiting the upside potential (for oil prices),” said Commerzbank analyst Carsten Fritsch.

(Graphic: Global COVID-19 death tally crosses 1 million – )

Reuters Graphic

The heads of the world’s largest trading houses predicted tepid oil demand recovery and flat prices in the coming months and possibly even years.

Meanwhile, all eyes were on the first U.S. presidential election debate, at which Democrat Joe Biden and Republican Donald Trump will square off, later on Tuesday (0100 GMT on Wednesday).

Hopes of a new economic stimulus programme in the United States lent some support to prices as Democratic lawmakers unveiled a $2.2 trillion coronavirus relief bill, which House of Representatives Speaker Nancy Pelosi said was a compromise measure.

G20 energy ministers emphasised the importance of stimulus packages in a joint statement on Tuesday.

Investors will also look for signs of growth in U.S. demand from American Petroleum Institute data on Tuesday and from the Energy Information Administration on Wednesday.

The average U.S. crude oil inventory estimate from five analysts polled by Reuters was that U.S. stocks rose by 1.4 million barrels in the week to Sept. 25. They expect gasoline stockpiles to have fallen by 1.6 million barrels and distillate inventories, which include diesel and jet fuel, to have declined by 800,000 barrels.

Clashes between Armenia and Azerbaijan over the Nagorno-Karabakh region have also kept markets on edge. If the conflict escalates, it could affect oil and gas exports from Azerbaijan.

“Disruptions to output and exports do not seem imminent. Nevertheless, the conflict has raised the geopolitical risk temperature,” said oil broker PVM’s Tamas Varga.

In a clear sign of weak demand in Japan, the world’s fourth-biggest crude buyer, official data showed the country’s August oil imports fell more than 25% from a year earlier.

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