Oil drops, reversing more than 2% gain in volatile session

Men work for Iraqi Drilling Company at Rumaila oilfield in Basra, Iraq,
Essam Al-Sudani | Reuters

Crude oil prices turned negative on Tuesday, despite expectations of U.S. economic stimulus to support the world's biggest oil consumer as well as a rebound in Asian demand as economies reopen.

West Texas Intermediate crude settled 33 cents, or 0.79%, lower at $41.61 per barrel, after earlier rising more than 2%. International benchmark Brent crude fell 37 cents, or 0.82%, to trade at $44.64 per barrel.

U.S. President Donald Trump tweeted on Monday that top congressional Democrats want to meet him to discuss coronavirus-related economic relief after talks broke down last week.

"A deal on the support package is not a foregone conclusion, but if a mutually acceptable accord is struck, stocks and oil will get a short-term boost," said Tamas Varga of oil brokerage PVM.

Signs of recovering Asian oil demand also boosted prices.

On Sunday, Saudi Aramco CEO Amin Nasser said he expects oil demand to rebound in Asia as economies open up.

China's factory deflation eased in July, driven by a rise in global oil prices and as industrial activity climbed back towards pre-coronavirus levels, adding to signs of recovery in the world's second-largest economy.

Prices also found support from a rally in European stocks, which rose for a third straight session on Tuesday as automakers gained on firm Chinese sales data.

U.S. passenger airline traffic, which was hit hard by the COVID-19 pandemic, was down 80% year on year in June, official figures showed, but was still nearly twice the levels in May.

Energy companies have begun taking back millions of barrels of oil from the U.S. government's emergency stockpile after renting storage to manage a glut of crude this spring after energy demand collapsed during coronavirus lockdowns, a Department of Energy website showed on Monday.