Oil falls as US stimulus package faces tough talks

NEW YORK: Oil prices fell on Tuesday as US lawmakers prepared to wrangle over an economic stimulus package and investors worried about a rise in coronavirus cases worldwide.

Brent crude futures fell 19 cents, or 0.4%, to settle at $43.22 a barrel, while US West Texas Intermediate (WTI) crude futures fell 56 cents, or 1.4%, to settle at $41.04 a barrel.

Brent is still on track for a fourth monthly rise, and US crude is expected to gain for a third month.

US Republicans on Monday unveiled a new coronavirus relief proposal hammered out with the White House, four days before millions of Americans lose expanded unemployment benefits. The package is facing opposition both from Democrats and from some Republicans, however.

"There's concern with the stimulus out of Washington, which is critical to the oil complex and to supporting demand, especially for gasoline," said John Kilduff, partner at Again Capital LLC in New York. Kilduff added that the longer the talks drag out, the more it will weigh on market sentiment.

Also a negative for prices, US consumer confidence ebbed in July amid a flare-up in COVID-19 infections across the country. Cases worldwide have risen to around 16.57 million people.

Investors are awaiting the outcome of the US Federal Reserve's policy-setting panel meeting on Tuesday and Wednesday. The panel is expected to reiterate that interest rates will remain near zero for years to come.

This month, Brent crude has fallen deeper into contango , a market structure in which the future price of the commodity is higher than the spot price, encouraging a build-up of inventories.

October prices were as much as 53 cents per barrel above September levels, compared with a 1 cent difference in early July.

"This suggests that the tightening we were seeing in the market has eased somewhat, with the demand outlook more uncertain given the resurgence of COVID-19 cases in some regions," said Warren Patterson, ING's head of commodities strategy.

Industry data on US stockpiles is due later on Tuesday. Analysts polled by Reuters expect US crude oil stockpiles likely rose last week, while inventories of refined products probably declined.

Elsewhere, Indian refiners are cutting crude processing and shutting units for maintenance as local fuel demand falls and global refining margins are weak, officials at the companies said.