Oil prices decline on high inventories, weak US stock markets

Fears about an oversupply also added to the general feeling of uncertainty
Oil prices fell further on Friday and were on track for a second weekly drop after the US stock markets tumbled and US stockpiles rose unexpectedly.

Brent fell 28 cents, or 0.7 per cent, at $30.78 a barrel by 12:10 GMT, and US crude was down 17 cents, or 0.5 per cent, to $37.13 a barrel.

Both benchmarks were 6 per cent down for the week.

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

The three main US 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 per cent of its value in five trading sessions as money managers liquidated,” oil broker PVM’s Tamas Varga said. Also dampening the market mood, the US 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.

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