Oil gains as governments pledge support amid coronavirus chaos

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Reuters
KEY POINTS
  • Brent crude was up 22 cents, or 0.8%, at $26.56 a barrel by 0415 GMT.
  • U.S. crude was up 42 cents, or 1.9%, at $23.02.
GP: Oil production as sun sets
Oil production in Azerbaijan
Vostok

Oil prices rose on Friday as governments around the world pledged a huge injection of funds and other measures to limit the economic fallout from the coronavirus pandemic, despite fears the outbreak will destroy demand for oil.

Brent crude was up 22 cents, or 0.8%, at $26.56 a barrel by 0415 GMT. U.S. crude was up 42 cents, or 1.9%, at $23.02.

Both of the benchmarks are down nearly two-thirds this year and the slump in economic activity and fuel demand has forced massive retrenchment in investment by oil and other energy companies.

Oil requirements around the world may drop by 20% as 3 billion people are in lockdown, the head of the International Energy Agency said as he called on major producers like Saudi Arabia to help stabilize oil markets. [nL8N2BJ8BB]

“It’s going to be a very uncertain year for us from a price point of view,” Peter Coleman, the head of Australian oil and gas developer Woodside Petroleum told investors on a conference call on Friday.

Leaders of the Group of 20 major economies pledged on Thursday to inject over $5 trillion into the global economy to limit job and income losses from the coronavirus and “do whatever it takes to overcome the pandemic.”

The United States has now passed China and Italy as the country with the most coronavirus cases, according to a Reuters tally, as the country faced a surge in hospitalizations and looming shortages in supplies, staff and sick beds.

“The U.S. is the most consequential oil demand region in the world and real-time GPS data suggests an 82% drop in congestion in major U.S. cities”, Capital Economics said in a note.

“Ultimately, U.S. consumption has to lead the way for meaningful global oil demand recovery,” it said.

Still, the availability of funds helped oil prices gain as other markets rose while more governments roll out additional stimulus measures to combat the pandemic.

Oil prices mixed as demand shrinks, but stimulus hopes support

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Reuters
KEY POINTS
  • West Texas Intermediate (WTI) crude futures slipped 4 cents, or 0.2%, to $24.45 as of 0018 GMT.
  • Brent crude futures rose 12 cents, or 0.4%, to $27.51.
GP: Oil production facilities 200205 ASIA
A kayaker passes in front of an offshore oil platform in the Guanabara Bay in Niteroi, Brazil, Saturday, Feb. 1, 2020.
Dado Galdieri | Bloomberg | Getty Images

Oil prices were mixed on Thursday following three days of gains, with the prospect of rapidly dwindling demand due to coronavirus travel bans and lockdowns offsetting hopes a U.S. $2 trillion emergency stimulus will shore up economic activity.

West Texas Intermediate (WTI) crude futures slipped 4 cents, or 0.2%, to $24.45 as of 0018 GMT, while Brent crude futures rose 12 cents, or 0.4%, to $27.51.

“With lockdowns in many countries, expectations of oil demand contracting by more than 10 million barrels per day (bpd) are rising. Such demand loss will increase the supply glut,” Australia and New Zealand Banking Group analysts said in a note.

The collapse of a supply-cut pact between the Organization of the Petroleum Exporting Countries (OPEC) and other producers led by Russia is set to boost oil supply, with Saudi Arabia planning to ship more than 10 million bpd from May.

“Production increases by Saudi Arabia and Russia loom, and things still look uncertain due to the ongoing price war between these two countries,” ANZ said.

U.S. crude inventories rose by 1.6 million barrels in the most recent week, the U.S. Energy Information Administration said on Wednesday, marking the ninth straight week of increases.

Products supplied, a proxy for U.S. demand, dropped nearly 10% to 19.4 million bpd, EIA data showed.

Oil extends gains as optimism over US stimulus lifts global markets

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Reuters
KEY POINTS
  • U.S. crude touched a high of $25.24 a barrel early in the session and was at $24.82 a barrel, up 81 cents, or 3.4%, by 0412 GMT.
  • Brent crude was trading up 75 cents, or 2.8%, at $27.90 a barrel after rising to a high of $28.29.
GP: Oil Pumping Jacks
Oil pumping jacks, also known as “nodding donkeys”, operate in an oilfield near Almetyevsk, Tatarstan, Russia, on Wednesday, March 11, 2020.
Andrey Rudakov | Bloomberg via Getty Images

Oil prices extended gains for a third session on Wednesday, rising alongside broader financial markets on hopes Washington will soon approve a massive aid package to stem the economic impact of the coronavirus pandemic.

U.S. crude touched a high of $25.24 a barrel early in the session and was at $24.82 a barrel, up 81 cents, or 3.4%, by 0412 GMT.

Brent crude was trading up 75 cents, or 2.8%, at $27.90 a barrel after rising to a high of $28.29.

The U.S. Congress may vote on Wednesday on the $2 trillion stimulus after Republicans and Democrats said they were close to a deal, with optimism over the package fueling a surge in stock markets.

Still, demand for oil products, especially jet fuel, is falling worldwide as more governments announce nationwide lockdowns to curb the spread of the coronavirus, putting a lid on oil price gains.

“It will be difficult to lift demand if lockdowns are announced in many countries and airline services remain suspended,” ANZ analysts said in a note.

The market is also facing the threat of increased supplies after the Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russia, a grouping known as OPEC+, failed to extend an agreement to cut production and support prices beyond end-March.

Oil prices have fallen about 45% so far this month.

“A pare back in production from the OPEC+ and a stabilisation in the coronavirus episode are both needed to lift oil prices back to its pre-collapse prices,” analysts at OCBC Bank said in a note.

In the United States, crude inventories fell by 1.2 million barrels in the week to March 20 to 451.4 million barrels, compared with analysts’ expectations for a build of 2.8 million barrels, data from industry group the American Petroleum Institute showed on Tuesday.

Gasoline and distillate stocks also fell last week, API said.

Analysts said in a Reuters poll on Tuesday that U.S. crude oil stockpiles likely built for a ninth successive week, while inventories of refined products were expected to have dropped, with gasoline set to decline for the eighth straight week.

The weekly report from the Energy Information Administration (EIA) is due at 10:30 a.m. on Wednesday.

Oil prices climb as US ramps up economic support measures

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Reuters
KEY POINTS
  • Brent crude oil futures for May delivery rose by 62 cents, or 2.3%, to $27.65 a barrel by 0346 GMT while West Texas Intermediate (WTI) crude futures gained 76 cents, or 3.3%, to $24.12.
  • Both price benchmarks had risen over $1 earlier before pulling back slightly.
GP: Oil production facilities 200205 ASIA
A kayaker passes in front of an offshore oil platform in the Guanabara Bay in Niteroi, Brazil, Saturday, Feb. 1, 2020.
Dado Galdieri | Bloomberg | Getty Images

Oil prices rose on Tuesday on hopes that the United States will reach a deal soon on a $2 trillion coronavirus aid package which could blunt the economic impact of the outbreak and in turn support oil demand.

Brent crude oil futures for May delivery rose by 62 cents, or 2.3%, to $27.65 a barrel by 0346 GMT while West Texas Intermediate (WTI) crude futures gained 76 cents, or 3.3%, to $24.12. Both price benchmarks had risen over $1 earlier before pulling back slightly.

“Oil is clawing its way higher mainly on the back of the weaker dollar that stemmed from the Fed’s unprecedented measures,” said Edward Moya, senior market analyst at broker OANDA.

“WTI crude volatility will remain high and traders should not be surprised if this rally eventually gets faded.”

The U.S. Federal Reserve on Monday rolled out an extraordinary array of programs to backstop an economy reeling from restrictions on commerce that scientists say are needed to slow the coronavirus pandemic.

While a $2 trillion coronavirus economic stimulus package remained stalled in the U.S. Senate on Monday as lawmakers haggled over its provisions, U.S. Treasury Secretary Steven Mnuchin voiced confidence that a deal would be reached soon.

The expected stimulus pushed the U.S. dollar lower as it will increase the cash supply. The dollar index, which measures the greenback against six major currencies, fell 0.5% on Tuesday.

A weaker greenback boosts dollar-denominated oil prices since buyers paying in other currencies will pay less for their crude.

Still, the overall crude demand outlook remains low as long as travel restrictions are in place and governments curtail commercial activities to prevent the coronavirus spread.

Prices and profit margins for motor and aviation fuels globally are under severe pressure from a plunge in demand as countries enforce lockdowns and airlines ground planes, forcing more refineries to reduce output and lower their crude oil demand.

Concerns over oil demand were also stoked by a doubling of new coronavirus cases in China, the world’s biggest oil importer, caused by a jump in infected travelers returning home from overseas. That is raising the risk of transmissions in Chinese cities and provinces that had seen no new infections in recent days.

“While the anticipated lengthy absence of air traffic presents a significant obstacle in its own right, … the expected ramp in supply, which suggests storage will fill very quickly, and then prices will plummet as physical demand continues to evaporate,” said Stephen Innes, chief global markets strategist at AxiCorp.

Oil markets slump amid coronavirus chaos

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Reuters
KEY POINTS
  • Brent crude futures fell $1.09, or 4%, to $25.89 a barrel by 0209 GMT.
  • West Texas Intermediate (WTI) crude futures was down 15 cents, or 0.7%, at $22.48 a barrel.
GP: Oil field 200310 Asia
A pumpjack near the Yamashinskoye rural settlement in the Almetyevsk District.
Yegor Aleyev | TASS | Getty Images

Oil prices fell on Monday as governments escalated lockdowns to curb the spread of the global coronavirus outbreak that has slashed the demand outlook for oil and threatened a global economic contraction.

Brent crude futures fell $1.09, or 4%, to $25.89 a barrel by 0209 GMT. West Texas Intermediate (WTI) crude futures was down 15 cents, or 0.7%, at $22.48 a barrel.

Oil prices have fallen for four straight weeks and have given up about 60% since the start of the year. Prices of everything from coal to copper have also been hit by the crisis, while markets in bonds and stocks enter rarely charted territory.

The coronavirus, which has infected more than 325,000 and killed over 14,000 worldwide, has disrupted business, travel and daily life. Many oil companies have rushed to cut spending and some producers have already begun putting employees on furlough.

The market has had to contend with the twin shocks of the demand destruction caused by the coronavirus pandemic and the unexpected oil price war that erupted between producers Russia and Saudi Arabia earlier this month.

The current production cut deal expires March 31.

“We believe oil prices will continue to fall into the teens in the short term amid disaster demand destruction, building global stocks and no production limits after April 1,” said Joseph McMonigle, senior energy policy analyst at Hedgeye Potomac Research, in a note.

Almost a third of Americans are now under orders to stay at home as states took extra measures to stem the rising numbers of cases in the world’s biggest economy, while in New Zealand Prime Minister Jacinda Adern said all non-essential services and business are to be shut down.

Demand is expected to fall by more than 10 million barrels per day (bpd), or about 10% of daily global crude consumption, said Giovanni Serio, head of research at Vitol, the world’s biggest oil trader.

Goldman Sachs estimated demand loss could total 8 million bpd, brought about by countries slowing economic activity to combat the coronavirus outbreak.

Oil refiners worldwide are slashing production or considering cuts as the pandemic causes the evaporation of fuel demand.