By Peter Nurse
Investing.com - Oil markets traded lower Thursday, as investors fretted at indications of deepening demand destruction even as U.S. policymakers moved closer to releasing a hefty stimulus package into the system.
AT 9:50 AM ET (1350 GMT), U.S. crude futures traded 4.1% lower at $23.48 a barrel, while the international benchmark Brent contract fell 1.1% to $27.10.
The Senate unanimously reached agreement on a $2 trillion relief package late Wednesday. The bill now moves on to the House of Representatives, with a vote expected on Friday. The bad news for the oil market in the bill is that it removed the $3 billion earmarked for filling the U.S. Strategic Petroleum Reserve, which promised to support domestic producers moderately as they struggle with the collapse in prices.
Oil demand worldwide continues to take hits as the pandemic severely curtails travel and more countries order lockdowns to curb the spread of the disease. India, the second most populous country and the third largest oil consumer in the world, started a 21-day lockdown Wednesday.
The weekly jobless claims report from the Labor Department, released earlier Thursday, offered the clearest evidence yet of the coronavirus' devastating impact on the economy.
The number of Americans filing claims for unemployment benefits surged to a record of more than 3 million last week, with initial claims coming in at a seasonally adjusted 3.28 million in the week ending March 21, eclipsing the previous record of 695,000 set in 1982.
Tuning to the supply side of the equation, the U.S. is putting increased pressure on Saudi Arabia to take a step back from the ongoing price war with Russia.
Secretary of State Michael Pompeo urged the Saudis to “rise to the occasion and reassure global energy and financial markets when the world faces serious economic uncertainty,” the State Department said on Wednesday.
However, there was no indication of any change in Saudi policy in King Salman's opening remarks at an emergency G20 meeting Thursday.
“The issue for the oil market is that even if we do see some restraint from the Saudis, the world is still set to see a significant oil surplus over 2Q20, given the demand hit we are currently seeing,” said analysts at ING, in a research note.
“This suggests that any potential action would likely only stabilize prices, rather than push the market significantly higher. Our base case view is that the price war continues over the upcoming quarter, which would see Brent moving towards US$20/bbl over 2Q20, “ ING added.
The Energy Information Administration reported late Wednesday a rise of 1.6 million barrels in U.S. crude inventories in the week ended March 20.