Oil Prices Up on Drop in Supply

Andrew Cummings
March 25, 2020

Brent crude rose 40 cents to $27.55 a barrel, a 1.5% gain.

Demand for oil products, especially jet fuel, is falling worldwide as more governments announce nationwide lockdowns to stop the spread of coronavirus.

ING on Wednesday slashed its Brent crude price forecast for the second quarter to $20 a barrel from $33 due to the coronavirus outbreak and an expected supply surge from Saudi Arabia and Russian Federation from April.

Oil prices also got a boost from US moves to halt the economic impact of the COVID-19 pandemic.

US crude CLc1 rose to a high of $25.24 a barrel early in the session and was at $24.86 a barrel, up 85 cents, or 3.5%, at 0732 GMT.

"No one has a handle of how much the world will come to a halt", said Edward Moya, senior market analyst at OANDA in NY.

It joined several other banks in slashing their oil price forecasts on account of the collapse of an output curb deal amongst members of the Organization of the Petroleum Exporting Countries and allies, or OPEC+, as well as the demand hit from the virus.

Early in the session both Brent and WTI were trading up over 5%.

The Fed on Monday rolled out an array of programs including backing for corporate bond purchases for the first time. Following the United States Federal Reserve's announcement of unprecedented measures to boost the economy on Monday, the U.S. Senate looked close to reaching an agreement on a massive stimulus package on Tuesday.

Oil prices have fallen by more than 45 per cent 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.

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.

Analysts said in a Reuters poll on Tuesday that US 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.

Industry group the American Petroleum Institute (API) was scheduled to release its supply report on Tuesday at 4:30 EDT (2030 GMT), followed by the USA government's figures on Wednesday.

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