Oil prices mixed as demand shrinks, but stimulus hopes support(Update)

  • Energy
  • Thursday, 26 Mar 2020

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.

MELBOURNE: 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. - Reuters

Oil prices settle higher on stimulus package, fuel demand sinks

NEW YORK: U.S. crude prices settled higher on Wednesday, bolstered by progress on a massive pending U.S. economic stimulus package, even as government data showed the coronavirus pandemic started undercutting U.S. fuel demand last week.

Demand for oil products, especially jet fuel, is falling dramatically as governments globally announce nationwide lockdowns to slow the spread of coronavirus.

Fuel demand is expected to fall sharply worldwide in the second quarter with aviation largely at a halt and road travel severely curtailed. Most recently, India, the world's second most populous country and the third-largest oil consumer, entered a 21-day lockdown.

U.S. weekly gasoline product supplied - a proxy for demand - dropped 859,000 barrels per day (bpd) to 8.8 million bpd last week, the biggest one-week decline since September 2019, according to the U.S. Energy Information Administration. Overall fuel demand fell by nearly 2.1 million bpd for the week.

West Texas Intermediate (WTI) crude futures rose 48.00 cents to settle at $24.49 a barrel, a 2% gain. Brent crude rose 24 cents, or 0.9% to settle at $27.39 a barrel.

U.S. senators and Trump administration officials have reached agreement on a $2 trillion stimulus bill that Congress was expected to pass on Wednesday, helping to boost markets.

The chief executive of the world's biggest oil trader, Vitol Group, estimated a demand loss of 15 million to 20 million barrels per day (bpd) over the next few weeks.

The U.S. energy sector is slashing capital spending and jobs, with capital expenditures at most shale companies expected to drop by at least 30%.

The outlook has turned "extremely pessimistic" amid the coronavirus pandemic, a survey by the Dallas Federal Reserve Bank of oil and gas companies showed on Wednesday. The Dallas Fed said its business activity index plunged from -4.2 in the fourth quarter to -50.9 in the first, the lowest reading in the survey’s four-year history.

"We are entering into the single worst reset in energy prices in my lifetime," said one respondent. Another said they were in "survival mode now."

Crude inventories rose by 1.6 million barrels in the most recent week, the EIA said. Inventories, which have risen for nine straight weeks, are expected to keep growing as fuel demand declines and refineries pare back activity.

Oil prices have fallen by more than 45% this month after OPEC+, comprising the Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russia, failed to agree on extending output cuts.

"This reminds me of the aftermath of the 1998 price crash and what it did to our productive capacity for the next decade," said John Kilduff, a partner at Again Capital Management in New York.

"These busts like this can be long lasting in the oil industry."

Prices to roll U.S. crude oil futures positions from April to May sank to minus $6.75 a barrel on Wednesday, the weakest since December 2008, signalling the expectation of sharp crude oiloversupply in coming months, traders said. - Reuters

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