US stock prices stay stable as oil prices drop

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Brent crude oil prices were down Thursday, as major oil producers warned against a prolonged economic recovery and stifled demand while the US oil stocks decreased less than market expectations.

International benchmark Brent crude was trading at $44.99 per barrel at 0613GMT for a 0.8% decrease after closing Thursday at $45.37 a barrel.

Oil prices dropped 0.97%

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American benchmark West Texas Intermediate was at $42.69 per barrel at the same time, down 0.97% after ending the previous session at $43.11 a barrel.

According to data released by the country’s Energy Information Administration (EIA) Thursday, commercial crude oil inventories in the US fell by 1.6 million barrels, or 0.3%, to 512.5 million barrels for the week ending Aug. 14.
The market expectation was a decrease of 2.7 million barrels.

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During the Joint Ministerial Monitoring Committee (JMMC) meeting in July, OPEC and non-OPEC oil-producing nations, known as OPEC+, warned against “the fragility of the market and large uncertainties, particularly associated with oil demand.”

COVID-19 continues to spread all over the world, exerting pressure on prices, as investors prepare for a decline in demand.

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Read more: Saudi Arabia and Russia make it clear that OPEC members must “respect” oil cuts

The number of COVID-19 cases worldwide is now over 22 million, according to the latest data from Johns Hopkins University.

As the US leads the number of cases with over 5.5 million as of Thursday morning, Brazil has over 3.4 million, and India follows with more than 2.8 million cases.

Crude oil fell into negative territory for the first time ever

Stocks on Monday gave back last week’s gains, with the Dow tumbling nearly 600 points, amid a historic drop in oil prices and fears that a decline in new coronavirus cases and a gradual reopening of the U.S. economy may not be enough to draw wary consumers back into stores and restaurants.

“They’re going to go back with caution,” says J.J. Kinahan, chief market strategist of TD Ameritrade. “Let’s not get ahead of ourselves.”

Meanwhile, U.S. benchmark crude oil fell into negative territory for the first time ever. West Texas Intermediate for May delivery plunged about 300% to -$37.63 per barrel.

The outsize drop was largely caused by unusually low trading volumes and the price for June delivery remained positive at about $20 after declining 12%, Kinahan says. The negative price signifies there’s virtually no market for oil and sellers must pay up to store crude supplies.

Still, he says the precipitous fall symbolizes the abrupt decline in global demand for oil as the pandemic discourages auto, air and other travel. Energy companies make up a relatively large share of Standard & Poor’s 500 companies.

Halliburton lurched between gains and sharp losses, even though it reported stronger results for the first three months of 2020 than analysts expected. The oilfield engineering company said that the pandemic has created so much turmoil in the industry that it “cannot reasonably estimate” how long the hit will last. It expects a further decline in revenue and profitability for the rest of 2020, particularly in North America.

The Dow Jones industrial average fell 592 points, or 2.4%, to 23,650. The S&P 500 index closed down 1.79% at 2,823. And the tech-heavy Nasdaq dropped 1% to 8,560.

Last week, the Dow rose 2.2%, largely on hopes that coronavirus cases were peaking nationwide and state and federal officials debate a phased-in lifting of stay-at-home orders. But Kinahan says Americans are likely to remain cautious for an extended period, leading to continued volatility for markets. Stock, he says, at least are trading in narrower ranges than the thousand point declines and spikes of a few weeks ago.

Read more: Saudi Arabia and Russia make it clear that OPEC members must “respect” oil cuts

Also weighing on stocks this week is a first-quarter earnings season that will show the pandemic’s initial blow to company profits and reveal guidance for coming quarters that may be bearish, Kinahan says.

“The government can declare whatever they want in terms of encouraging people to get out and do stuff,” said Willie Delwiche, investment strategist at Baird. “Whether or not broad swaths of society do that remains to be seen. It’s going to take seeing people start to get out and do stuff again. That will be the necessary positive development, not just declaring getting things open.”

More gains from companies that are winners in the new stay-at-home economy helped limit the market’s losses. Netflix jumped 3.4% to set another record as people shut in at home look to fill their time. Amazon added 0.8%.

AFP with additional input by GVS News Desk

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