On Thursday, U.S. oil prices increased by 10% following a three-day plunge as the outbreak of the coronavirus and combat for market share among Saudi Arabia and Russia steered prices to their lowest in about 20 years.
Benchmark Brent, which has lost about half its value in less than two weeks, received some hiatus as investors across financial markets gauged the impact of massive central bank stimulus measures.
Brent crude LCOc1 went up by 93 cents, or 3.8%, at $25.81 per barrel by 1416 GMT, having dipped to $24.52 on Wednesday, its lowest level since 2003.
West Texas Intermediate (WTI) crude CLc1 managed to gain $2.20, or 10.8%, to $22.57 after plunging nearly 25% to an 18-year low in the last session.
However, Analysts explained gains were likely to be temporary as falling demand is amalgamated by the plunge this month of a deal among OPEC, Russia, and others to rein supply.
Saudi Arabia, de facto leader of OPEC, has since kick-started a price war with Russia, plans to shoot supply to a record-high 12.3 million barrels per day (bpd) for months. The fall in demand, especially in transportation, is also resulting in a rapidly growing glut in refined products like jet fuel and gasoline.
“From April 1, about 4 million bpd could flood the markets, potentially pushing down crude oil prices into the teens,” Jefferies analysts stated in a note.
“Unless somebody intervenes, no oil producer benefits from the current environment.”
Lockdown is in trend
Dozens of shale oil and gas drillers and services companies in the United States are on the verge of bankruptcy. Amidst all this chaos, senators on Wednesday asked Saudi Arabia and Russia to stop their price war during talks with the kingdom’s envoy to Washington. The senators also requested President Donald Trump to implement an embargo on oil from the two countries.
In the meantime, the outbreak of the virus is exhibiting no sign of receding, with governments of different countries relying on lockdowns in the hope to contain the disease, escalating the chance of a global recession.
Central banks have opted to move to ease-up the circling economic and financial fallout, with the European Central Bank starting a 750 billion euro ($820 billion) emergency bond purchase scheme.
“While the spreading of the virus has further to go and oil prices further to drop, we are now probably getting very close to peak fear in western and global financial markets,” said Bjarne Schieldrop, chief commodities analyst at SEB.
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