WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude on the Intercontinental Exchange moved mixed in early trade Tuesday as U.S. dollar rebounded from a two-year low and equity futures were down under pressure from the rising coronavirus cases in the United States and elsewhere.
In early trading, NYMEX West Texas Intermediate September crude futures slipped 26 cents to near $41.30 per barrel (bbl) and the international benchmark Brent crude contract traded little changed near $43.50 bbl. NYMEX ULSD August futures slipped 0.49 cents to $1.2492 gallon and the front-month RBOB contract moved up slightly to $1.2747 gallon.
The weaker U.S. dollar is trading below the 94.0-cent level, its lowest since May 2018, continuing to boost investor appetite for risk assets such as crude oil. With the Federal Open Market Committee meeting later Tuesday where Federal Reserve Chairman Jerome Powell is expected to express continued support for the Fed's dovish monetary policy, the decline in the U.S. dollar is likely to continue, keeping oil prices buoyant.
Meanwhile, the U.S. Senate Majority Leader McConnell on Monday formally announced details of a newly proposed trillion-dollar fiscal stimulus package, which would provide most Americans with a $1,200 stimulus check and cut enhanced weekly unemployment benefits by two-thirds, from the current $600 to about $200 a week, according to the news reports.
The government spending, while adding pressure on U.S. dollar strength, is likely to boost consumer spending at a time when oil demand recovery outlooks appear to have stalled.
Goldman Sachs said this week the recovery in oil demand is slowing as COVID-19 infections continue to surge in the United States and elsewhere.
"Our Bottom-Up model further confirms the ongoing slowing of demand improvements, with a daily rate of demand gains of just 50 kb/d over the past three weeks, down 60% from the May-June pace of gains, bringing demand to c.10 mb/d below its pre-COVID path in mid-July," the investment bank said in a research report. "This slowdown is driven by a sharp stalling in the U.S. due to the resurgence of the virus, an only small increase in global jet demand and finally the headwinds to normalizing activity even in countries where the virus remains under control. After a 12.5 mb/d increase in demand levels from April to July, our top-down model leads us to forecast that the pace of monthly demand gains is set to slow to below 1 mb/d from August through December."
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