Oil prices rally on hopes for USA stimulus

Marco Green
March 25, 2020

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.

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 United States dollars 2 trillion.

The bank said on January 28 that crude oil prices could fall by $2 per barrel on average in 2020 due to the economic effects of the coronavirus outbreak, adding if air passenger traffic in China halves during the first quarter of 2020, it would lead to a 300,000-barrel-per-day loss in China's jet-kerosene demand.

"Demand continues to deteriorate as more countries impose shutdowns and stricter travel restrictions", the bank's analysts said in a note.

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.

The market was substantially off the day's highs, however, and analysts remain pessimistic that oil prices will stage an extended recovery amid the worsening coronavirus pandemic and the ongoing oil price war between Saudi Arabia and Russian Federation.

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

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

Other reports by Click Lancashire

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