Published: Wed, March 25, 2020
Markets | By Otis Pena

Oil extends falls as US stimulus lifts global markets

Oil extends falls as US stimulus lifts global markets

Worldwide benchmark Brent crude was trading at $27.85 per barrel at 0615 GMT for a 2.57% increase after closing Tuesday at $27.15 a barrel.

USA crude was at $23.58 a barrel, down 81 cents, or 3.4%.

Last week oil prices hit their lowest levels in around 17 years as the coronavirus pandemic continues to weaken global oil demand, and with Saudi Arabia and Russian Federation due to increase their crude oil production from the beginning of April.

"A pare back in production from the OPEC+ and a stabilization 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.

Canada seems to be few days away from running out of storage for its local oil production, and other countries may follow trend in a coming months.

The Fed on Monday rolled out programs including backing for corporate bond purchases for the first time.

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USA senators and Trump administration officials have reached an agreement on a $2 trillion stimulus bill that congress was expected to pass on Wednesday.

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 Russian Federation, failed to agree on extending output cuts.

"Prices are likely to remain under pressure until the virus situation turns the corner, and if we continue on the projected market balances path, even Saudi Arabia and Russian Federation will not be immune from the price fallout, in our view, despite their low cash operating costs", Barclays said in its Commodities Research report.

"Although oil futures are getting a sentiment-led boost this morning, the challenge for the physical oil market is a looming and growing oversupply which will cause a "nowhere to hide" situation very soon", said Bjornar Tonhaugen, head of oil markets at Rystad Energy.

Analysts said in a Reuters poll on Tuesday that USA 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.

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