Oil prices fall as demand woes eclipse USA stimulus

Brent crude drops to $25 oil demand drops by about 10% of world’s consumption

Oil prices rose modestly on Tuesday, but settled off the day's highs as the coronavirus pandemic's heavy toll on demand offset hopes for a forthcoming $2 trillion USA economic relief package. Overall fuel demand fell by almost 2.1 million bpd.

Global benchmark Brent crude was up 2.9 per cent to trade at almost Dollars 28 per barrel, while U.S. benchmark West Texas Intermediate rose 3.5 per cent to almost USD 25 per barrel.

Brent LCOc1 futures rose 12 cents, or 0.4%, to settle at $27.15 a barrel. Analysts were looking for a build of 2.8 million barrels.

Distillate inventories were also down, by 1.90 million barrels for the week.

The available SPR storage is less than 80 million barrels, according to Department of Energy data, and would amount to a flow of less than 0.5 million bpd when filled over a period of six months, compared with nearly 10 million barrels of projected oversupply over the second quarter, it added.

US senators and Trump administration officials have reached an agreement on a $2 trillion stimulus bill that Congress was expected to pass on Wednesday, helping to boost markets.

The market is also facing the threat of increased supplies after the Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russian Federation, a grouping known as OPEC+, failed to extend an agreement to cut production and support prices beyond end-March.

Although oil futures received a "sentiment-led boost this morning, the challenge for the physical oil market is a looming and growing oversupply which will cause a "nowhere to hide" situation very soon", said Bjornar Tonhaugen, head of oil markets at Rystad Energy.

Analysts remain pessimistic that oil prices will stage an extended recovery amid the worsening pandemic and the ongoing oil price war between Saudi Arabia and Russian Federation.

This is a much bigger decrease than last week's 421,000 barrels.

Vitol said refineries have so far cut about 7 million bpd, a figure the company expects to rise further as storage fills up. Most recently, India, the world's second most populous country and the third-largest oil consumer, entered a 21-day lockdown.

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