Crude extends fall in Asia trade as US stimulus hopes fade

Singapore — 0303 GMT: Crude Oil futures continued to fall in mid-morning trade in Asia Oct. 2, extending overnight losses, as hopes of an agreement for a US stimulus package faded.

At 11:03 am Singapore time (0303 GMT), ICE Brent December crude futures were down 58 cents/b (1.42%) from the Oct. 1 settle at $40.35/b, while the NYMEX November light sweet crude contract was 59 cents/b (1.52%) lower at $38.13/b. Both markers fell more than 3% on Oct. 1.

The pessimism was fueled by expectations that a new US stimulus package would not be approved any time soon after US Speaker of the House Nancy Pelosi said the Democrats and Republicans were nowhere close to reaching consensus.

Hopes of a stimulus package had earlier been buoying market sentiment as it was expected to invigorate the stagnating US economic recovery and boost demand for oil.

"Crude oil price viciously dipped mainly amid deep skepticism from US House Speaker Pelosi on the possibility of any US stimulus," AXI Chief Global Markets Strategist Stephen Innes said in a note Oct. 2. "[In] the oil markets where fundamentals are not supportive, a move higher is only possible if a fiscal agreement is reached," he added.

With US stimulus hopes waning, the market is left with bearish supply and demand fundamentals, including a resurgent coronavirus pandemic and the prospect of increased OPEC+ supply.

"Disheartening virus surges in NYC and expectations that Europe is about to restrict movement in a lot of countries are sapping hopes crude demand [will] improve in the short term," OANDA Senior Market Analyst Edward Moya said in a note Oct. 2.

On the supply side, Moya noted: "Oversupply concerns are ebbing back after a survey showed OPEC output climbed 40,000 b/d to 24.23 million b/d in September."

An internal document seen by S&P Global Platts Oct.1 showed the OPEC+ alliance currently has 2.375 million b/d of compensation cuts to make up for prior overproduction.

The struggle for supply-demand balance is expected to persist as speculation over increased production by OPEC+ members such as Russia, Iran and Libya rattled markets this week, and as Libyan oil production has more than doubled to over 250,000 b/d after the Libyan National Army lifted an oil embargo, Platts reported earlier.