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Crude Oil Heads Lower; Stimulus Boost Fails to Last

Published 03/25/2020, 09:57 AM
Updated 03/25/2020, 11:00 AM
© Reuters.

© Reuters.

By Peter Nurse 

Investing.com - Oil markets turned lower Wednesday, with a bounce caused by the hefty stimulus package agreed on Capitol Hill short-lived as investors revisit the specter of deepening demand destruction and massive oversupply.

AT 10:50 AM ET (1450 GMT), U.S. crude futures traded 2% lower at $23.52 a barrel, while the international benchmark Brent contract fell 2.4% to $26.50. 

A bipartisan Congress managed to come to an agreement early Wednesday on a $2 trillion stimulus measure to try to bolster the U.S. economy as it shuts down to combat the coronavirus.

However, the positive tone generated by this bill didn’t last very long as large parts of the global economy remain shut down to stop the spread of the virus.

“Clearly the fundamental outlook for the oil market remains bearish, given the weakening demand picture and expected surge in supply from the start of 2Q20. We still expect prices to trade lower from current levels,” said analysts at ING, in a research note.

In the U.S. inventory data out this week, the government reported a smaller-than-expected build in crude stocks

Oil inventories rose by 1.6 million barrels for the week ended March 20, the EIA said. That compared with expectations for a build of about 2.8 million barrels, according to forecasts compiled by Investing.com.

Gasoline inventories fell by 1.5 million barrels, versus forecasts for a decline of about 660,000 barrels. Distillate stockpiles fell by about 680,000 barrels, compared with expectations for a drawdown of 1.9 million barrels.

Talking about the supply situation, neither Saudi Arabia nor Russia show any sign of getting back to the negotiation table in order to curtail supply, in fact they look more likely to pump more oil to gain market share. 

“There’s a lot of oil in the market and there’s a lot of stocks we’re going to have to build because it’s not going to get consumed,” Vitol Chief Executive Officer Russell Hardy said in a Bloomberg Television interview on Wednesday. “Demand today we think is down significantly, 15 to 20 million barrels a day at its peak over the next few weeks.”

“The deepening contango in the ICE (NYSE:ICE) Brent forward curve reflects the surplus environment, and the need for this surplus oil to be carried forward,” ING added.

Latest comments

Investors are looking past the looming storage problem because they are now realising it is just short term - US Pres Trump wants people back to work by Easter and he will probably succeed.   I am of the opinion that the  corona virus scare is GREATLY OVERSTATED - Here in Canada we only have 25 deaths so far, which is so ridiculously low that it may as well be zero !!    THE CDC states that the common flu is more dangerous but the shorts keep spreading fear to make $$.   Wake up people, this corona virus nonsense will go away soon.........
Coronovirus kills between 1 and 3 percent of the people that get the virus. Common Flu has a north point one percent (0.1) death rate. More people that get the Coronovirus need hospitalization than they would with the flu. Considering especially in America where health coverage is different from state to state many more people are going to die because they can't afford health care. Coronovirus is a bad disease the press and the government are not overstating anything if anything they are not doing enough. As of March 25 the best advice is to stay inside, and if you have to go out practice social distancing.
You may want to remove this article, no longer accurate - oil moving higher now. How quickly things change...........
By a few Dollars which speaking statistically could just be a mistake. It is still way down from just over 60 in January to just under 25 Dollars today.
Oil is Trading just under 25 Dollars now it was Trading over 60 Dollars in January. This article is still relevant.
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