Oil futures were mixed in early trade Tuesday, with the U.S. benchmark drifting lower as pressure on the U.S. dollar let up and investors watched negotiations toward a second coronavirus aid package.
West Texas Intermediate crude for September delivery was off 19 cents, or 0.5%, to $41.41 a barrel on the New York Mercantile Exchange, while the global benchmark, October Brent crude was up 4 cents, or 0.1%, at $43.94 a barrel on ICE Futures Europe.
The ICE U.S. Dollar Index, a measure of the currency against a basket of six major rivals, was up 0.1% a day after hitting a two-year low. A weaker dollar can be supportive to commodities priced in the currency, making them less expensive to purchasers using other currencies.
Analysts noted oil has remained largely rangebound in recent trading, with market participants attempting to gauge prospects for demand amid the COVID-19 pandemic.
October Brent, the most actively traded contract, now trades at around a 40-cent discount to the November contract versus a gap of as little as 7 cents in early July, noted Warren Patterson, head of commodities strategy at ING, in a note.
The increasing contango “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,” Patterson said, while the support from strong Chinese crude oil imports in previous months appears to be waning.
With signs the U.S. economic recovery may be slowing, Senate Republicans on Monday unveiled a roughly $1 trillion coronavirus relief package, kicking off negotiations with Democrats over a package. A battle looms over supplemental unemployment benefits, with Democrats eager to maintain the existing $600 weekly supplement, while the Republican plan would reduce it to a $200 add-on through September. The supplemental jobless benefits are due to expire at the end of the month.
Meanwhile, the market is preparing for a surge in supply from the OPEC+ alliance, which agreed to relax curbs on output by 2 million barrels a day beginning in August.