Oil edged up on Tuesday on hopes that the United States was nearing a stimulus deal, but the threat to demand from rising coronavirus cases worldwide and increased Libyan output kept prices from moving higher.
Brent crude futures gained 20 cents to $42.82 a barrel. November U.S. West Texas Intermediate crude futures settled 63 cents, or 1.54%, higher at $41.46 per barrel.
Investors are following negotiations between U.S. House of Representatives Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin over another U.S. coronavirus aid package, said John Kilduff, partner at Again Capital in New York.
“If we get a deal, I think that would be supportive, and if we don’t get a deal, I think that’s going to be somewhat punishing for prices,” Kilduff said.
Prices ticked up after Pelosi said in an interview with Bloomberg TV on Tuesday she was optimistic Democrats could reach a deal with the Trump administration and aid could go out by early next month.
The rebound in COVID-19 cases in Europe and North America that has sparked renewed lockdown measures is weighing on oil prices, Kilduff said.
“It undermines sentiment, it undermines economic activity, it undermines demand,” he said.
A ministerial panel of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+, pledged on Monday to support the market.
However, those countries plan on scaling back the size of its production cuts in January from a current 7.7 million barrels per day (bpd) to roughly 5.7 million bpd in January.
OPEC member Libya, which is exempt from the cuts, is also ramping up production after armed conflict shut almost all of the country’s output in January, pumping more oil into an oversupplied market.
Output from its biggest field, Sharara, resumed on Oct. 11 and is now at about 150,000 bpd, about half its capacity, two industry sources told Reuters.
Another 70,000 bpd oilfield is expected to restart on Oct. 24.