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Oil price sinks and global equities rally cools



Crude Oil Price Gains 3% As China Eases COVID-19 Restrictions

Oil prices sunk on Tuesday and a global equities rally that had kicked off the week fizzled, as a month of choppy trading neared its end and investors awaited word on a potential stimulus deal out of Washington.

The benchmark S&P 500 index slipped 0.5 per cent, ending a three-day streak of advances. US stocks were weighed down by the energy sector as shares of the oil majors ExxonMobil and Chevron both fell more than 2 per cent.

Brent crude, the oil price benchmark, settled 3.3 per cent lower at $41.03 a barrel. Traders said optimism about a further recovery in demand had waned, with crude consumption still down more than 5 per cent from pre-pandemic levels.

A host of senior oil trading executives and fund managers told an FT conference on Tuesday that oil would be stuck near $40 a barrel until there was an effective Covid-19 vaccine.

“It’s very hard to be bullish on oil,” said Ben Luckock, co-head of oil trading at Trafigura, predicting that Brent would likely slip to below $40 a barrel before the end of the year.

Pierre Andurand, one of the biggest specialist oil hedge fund managers, said he expected Opec would need to keep production cuts in place well into 2021 and the cartel’s member countries were not in a position to start adding barrels back to the market, as they had planned.

“We shouldn’t need higher prices now or for the next few months or so,” Mr Andurand said, arguing that the oil market was still too well supplied.

A Reuters poll estimated that US crude inventories increased by 1.4m barrels in the week to September 25, compared to a fall the week before.

Investors were watching for developments out of Washington after Democrats in the House of Representatives put forward a $2.2tn spending plan on Monday.

House speaker Nancy Pelosi met Treasury secretary Steven Mnuchin on Tuesday to discuss the package, although it is unclear if the two sides can reach an agreement before members leave the capital to campaign for the November election.

European bourses closed lower, with the region-wide Stoxx 600 and London’s FTSE 100 down 0.5 per cent. Although bank stocks led gains on both sides of the Atlantic during an equities rally on Monday, financial stocks were also among the worst-performing sectors on Tuesday.

Tokyo’s Topix index closing down 0.2 per cent and Hong Kong’s Hang Seng falling 0.9 per cent. South Korea’s Kospi and China’s CSI 300 index of Shanghai and Shenzhen-listed stocks both pared earlier gains to rise 0.9 per cent and 0.2 per cent respectively.

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