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CORRECTED-UPDATE 6-Oil drops on higher inventories, weak U.S. stock markets

Fri, 11th Sep 2020 05:08

(Corrects Brent price to $39.78 (not $30.78), paragraph 2)

By Bozorgmehr Sharafedin

LONDON, Sept 11 (Reuters) - Oil prices fell further on
Friday and were on track for a second weekly drop after U.S.
stock markets tumbled and U.S. stockpiles rose unexpectedly.

Brent fell 28 cents, or 0.7%, at $30.78 a barrel by
1210 GMT, and U.S. crude was down 17 cents, or 0.5%, to
$37.13 a barrel.

Both benchmarks were 6% down for the week.

"Financial markets are continuing to set the tone, including
on the oil market. The renewed slide on U.S. stock markets
dragged oil prices down with it," Commerzbank analyst Eugen
Weinberg said.

The three main U.S. stock indexes were headed for a second
straight weekly decline as recent economic indicators suggest a
long and difficult recovery from the pandemic.

"Stock markets dived, oil followed, and Brent lost 15% of
its value in five trading sessions as money managers
liquidated," oil broker PVM's Tamas Varga said.

Also dampening the market mood, the U.S. Senate killed a
Republican bill that would have provided around $300 billion in
new coronavirus aid.

Fears about an oversupply also added to the general feeling
of uncertainty, Weinberg said.

In the United States, stockpiles rose last week, against
expectations, as refineries slowly returned to operations after
production sites were shut down due to storms in the Gulf of
Mexico and the wider region.

U.S. crude inventories rose 2 million barrels, compared with
forecasts for a 1.3 million-barrel decrease in a Reuters poll.

In a further bearish sign, traders were starting to book
tankers again to store crude oil and diesel, amid a stalled
economic recovery as the COVID-19 pandemic continues.

Increasing stockpiles are likely to be a subject at a
meeting on Sept. 17 of the market monitoring panel of the
Organization of the Petroleum Exporting Countries (OPEC) and
allies including Russia.

The group known as OPEC+ has been withholding supply to
reduce stockpiles, but analysts say the meeting is likely to
focus on compliance among members, rather than seek deeper cuts.

Following Saudi Arabia, Kuwait also lowered its official
selling price to Asia for October, to counter slower demand.

(Reporting by Bozorgmehr Sharafedin in London and Aaron
Sheldrick in Tokyo; Editing by Susan Fenton and David Evans)

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