Oil prices up on $2 trillion USA stimulus optimism

Oil prices up on $2 trillion USA stimulus optimism

Oil prices up on $2 trillion USA stimulus optimism

Oil rose over 3% on Tuesday after the U.S. Federal Reserve said it would take steps to bolster the economy and on growing hopes the United States will soon reach a deal on a US$ 2 trillion coronavirus economic package.

API estimated a surprise draw of 1.247 million barrels in the US crude oil inventory for the week ending March 21, with a build of 2.774 million barrels.

The market was substantially off and analysts remained pessimistic that oil prices would stage an extended recovery amid the worsening coronavirus pandemic and the ongoing oil price war between Saudi Arabia and Russian Federation.

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

British investment bank Barclays said it has reduced its Brent and WTI price forecasts by $12 per barrel for 2020, noting that they are now below both the curve and consensus.

Wednesday's gains came after the Dow surged 11.4 per cent, its biggest one-day percentage increase since 1933, on indications Congress is nearing agreement on a rescue package for the USA economy that could amount to more than Dollars 2 trillion. 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.

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

"We are entering into the single worst reset in energy prices in my lifetime", said one respondent.

The end of the deal would allow Saudi Arabia, Opec's de facto leader, to race Russian Federation to increase oil production in a bid to grab a greater share of the market.

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

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