Oil Prices Down Over 2% As Virus Worries Mount

COVID-19: Oil majors slash 2020 spending by 18%

Oil prices fell on Wednesday despite a massive pending US economic stimulus package as the coronavirus pandemic sharply dented USA fuel demand in the latest week, with traders bracing for further declines.

Analysts at Goldman say Brent crude, the worldwide benchmark, will remain around $20 in the second quarter - down from $29 a barrel now - but the price of the US benchmark should drop "well below $20 a barrel". US crude futures fell 21 cents, or 0.9 per cent, to $23.80 a barrel. $2 trillion emergency stimulus will bolster economic activity. Both contracts are down about 60% this year.

The U.S. Senate on Wednesday overwhelmingly backed a $2 trillion bill aimed at helping unemployed workers and industries hurt by the CCP virus epidemic.

The data showed gasoline inventories fell by 1.5 million barrels, more than twice the expected drop, while distillate stockpiles were lower by about 680,000 barrels, compared with an expected drop of 1.9 million barrels. Inventories, which have risen for nine straight weeks, are expected to keep growing as fuel demand declines and refineries pare back activity.

At the same time, the collapse of a supply-cut pact between the Organization of the Petroleum Exporting Countries and other producers led by Russian Federation, known as OPEC+, is set to boost oil supply, with Saudi Arabia planning to ship more than 10 million bpd from May.

Efforts by the United States to persuade Saudi Arabia to limit supplies as its shale oil industry struggles with the price collapse were unlikely have much effect on, Dutch bank ING said. Coronavirus-related measures have dealt such a major blow to oil demand in the short-term that the damage can not be offset by any realistic production cuts.

A global energy firm, Wood Mackenzie, noted recently that the coronavirus outbreak had derailed the alliance between the Organisation of Petroleum Exporting Countries and its partners, thrown the oil market into turmoil, and sent the oil and gas sector into free-fall-all setting in motion a chain of events that led to the steepest price drop in 30 years. "This suggests that any potential action would likely only stabilize prices, rather than push the market significantly higher".

The U.S.' crude oil imports decreased by 422,000 barrels per day (bpd) to 6.12 million bpd for the week ending March 20, and crude oil exports saw a decline of 528,000 bpd to 3.85 million bpd, according to the EIA data.

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