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Oil steadies as demand fears due to Covid-19 offset high OPEC compliance

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Oil prices steadied on Tuesday as high compliance with supply cuts from the OPEC+ producer group offset demand fears from the new coronavirus.

Brent crude futures rose 9 cents to settle at $45.46 a barrel. US West Texas Intermediate (WTI) crude futures ended unchanged at $42.89 a barrel.

Supporting prices on Tuesday, a technical panel found that compliance with OPEC+ oil output cuts in July was between 95% and 97%, according to a draft report seen on Monday by Reuters.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, a grouping known as OPEC+, eased their cuts in August to 7.7 million barrels per day (bpd) from 9.7 million bpd previously.

OPEC+ will hold a ministerial panel meeting on Wednesday.

“Expect OPEC+ to communicate that they request strict compliance from all members and cheer for the success of the measures to date,” said Rystad Energy’s Bjornar Tonhaugen.

Still, the coronavirus pandemic, which has raged for months, shows no signs of letting up. In the Americas alone, almost 11.5 million have contracted the disease, and over 400,000 people have died as a result of the pandemic, the World Health Organization regional director Carissa Etienne said on Tuesday.

The United States and Brazil are the biggest drivers of the Covid-19 case count in the Americas, Etienne added.

“There are still ongoing concerns about Covid and there are continuing concerns about the lack of a deal in Congress for stimulus,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.

The US Congress has so far failed to agree on another fiscal relief package to stem economic fallout from the pandemic.

Meanwhile, some European countries have renewed travel quarantines, which impact jet and motor fuel demand.

Australian miner and oil producer BHP said in its earnings on Tuesday that it believes “the most significant risks to the physical (oil) market have now passed,” adding that the pace of gains could be modest given potential headwinds from supply returning.

US crude oil and distillate stockpiles fell last week, while gasoline inventories rose, industry data from the American Petroleum Institute showed after the markets closed on Tuesday. Crude inventories fell by 4.3 million barrels to about 512 million barrels, more than analysts’ expectations for a 2.7 million-barrel draw.

US government inventory data is due on Wednesday at 10:30 a.m. EDT (1430 GMT).

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