By Barani Krishnan
Investing.com - The $2 trillion U.S. coronavirus stimulus package may be doing wonders for stocks, but not yet oil.
Crude prices rose more modestly on Wednesday despite Wall Street’s Dow, which added another 1,000-odd points to yesterday’s gain of more than 2,000. Analysts said oil traders were moving cautiously amid the broader risk appetite stirred by the stimulus package agreed between the White House and Congress.
“There are two trillion reasons why oil will not go to zero, but we may not be out of the woods yet,” said Phil Flynn, analyst at Price Futures Group in Chicago.
West Texas Intermediate, the New York-traded benchmark for U.S. crude prices, settled up 48 cents, or 2%, at $24.49 per barrel.
Brent, the London-traded global benchmark for crude, settled up 24 cents, or 0.9%, at $27.39.
Crude prices are down more than 50% on the year as lockdowns across the world to contain the Covid-19 outbreak brings to a halt virtually all non-essential travel or work. Analysts are warning that an unimaginable wall of crude supply might build in the second quarter, straining global oil storage, which was already at capacity.
Complicating the situation in oil is the tussle for greater market share between Saudi Arabia and Russia, who have both moved to hike output and undercut each other on the selling price of crude to boost their respective exports. Analysts have warned that less-competitive U.S. crude exporters might be the biggest losers in the game.
U.S. Secretary of State Mike Pompeo, in a telephone conversation on Tuesday with Crown Prince Mohammed bin Salman, the virtual ruler of Saudi Arabia, urged the kingdom to "reassure" oil and financial markets amid global risks from Covid-19, the State Department said.
That means: “Please cut some production.”
Pompeo placed the call to the crown prince amid mixed feelings his boss — U.S. President Donald Trump — has about the oil market.
Trump, who is seeking re-election in November, is happy that the crash in oil prices has slashed gasoline prices at pumps, delivering relief to consumers. But he’s also worried about the threat of bankruptcy that such low prices pose to U.S. shale drillers, who helped turn the United States into the world’s largest oil producer, averaging 13 million barrels per day, and also putting the country on the road to energy independence.