WASHINGTON (DTN) -- Heading into early hours Monday, oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange slipped lower, with the U.S. benchmark trading below $40-a barrel after Organization of the Petroleum Exporting Countries and Russia-led partners scaled back production cuts by some 2 million barrels per day (bpd) on Aug.1, stoking oversupply concerns as global demand shows signs of uneven recovery.
Also weighing on market sentiment, lawmakers on Capitol Hill failed to reach a deal over the weekend to extend supplemental $600 per week benefits for some 30 million Americans who lost their job due to the COVID-19 pandemic. Together with that expiration, a moratorium on evictions lapsed on July 24, days before August rent payments would have come due. Both expirations will probably mean a certain "fiscal cliff" for many American households, further undermining consumer confidence and spending. U.S. first-time unemployment claims have been risen for two straight weeks through July 25 after steadily declining since late March.
"We now have a debt the size of our economy for the first time since World War II, and they're concerned about that. And I think that's a legitimate point of view," said Majority Leader Mitch McConnell after the failed negotiations with House Democrats on Saturday.
The talks will resume Monday.
Meanwhile, U.S. new coronavirus cases have eased to 58,400 as of Sunday, down some 11% from last Sunday's 65,809, with hard-hit states like Texas and Florida registering fewer daily cases. In most of the 27 states where cases have been trending higher in the past two weeks, the trend line reversed to steady over the weekend, raising hopes new mitigating policies are yielding some results.
Even still, global demand recovery is choppy with coronavirus flare-ups in Europe and Asia causing some localized shutdowns and business re-closures. Against those headwinds, OPEC+ alliance tapered production cuts over the weekend to 7.7 million bpd from 9.7 million in May-July. Sources indicate Russia's oil and gas condensate output stood at 9.807 million bpd on Aug. 1-2 versus 9.37 million bpd in July, on average. Key ministers from the 23-nation coalition will hold their next monitoring meeting on Aug. 18.
In early trading, the NYMEX West Texas Intermediate contract for September delivery declined 30 cents to $39.98 per barrel (bbl) and the international Brent crude contract traded down 22 cents at $43.30 bbl. NYMEX ULSD September futures declined 0.35 cents at $1.2205 gallon and the front-month RBOB contract fell 0.62 cents to $1.1649 gallon.
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