Economy

Oil prices fall as demand woes eclipse US stimulus

Oil prices fall as demand woes eclipse US stimulus”

Brent LCOc1 futures rose 12 cents, or 0.4%, to settle at $27.15 a barrel.

But some analysts struck a note of caution, as demand continues to decrease with more countries imposing lockdowns to curb the spread of COVID-19 while Saudi Arabia and Russian Federation are also no closer to ending their price war.

USA crude CLc1 rose to a high of $25.24 a barrel early in the session and was at $24.86 a barrel, up 85 cents, or 3.5%, at 0732 GMT. Following the United States Federal Reserve's announcement of unprecedented measures to boost the economy on Monday, the U.S. Senate looked close to reaching an agreement on a massive stimulus package on Tuesday.

The price war in oil industry will raise the world's oil production by 2.5million barrels of oil per day.

Official data from the Energy Information Administration is expected on Wednesday.

The market was substantially off and analysts remained pessimistic that oil prices would stage an extended recovery amid the worsening coronavirus pandemic and the ongoing oil price war between Saudi Arabia and Russian Federation.

"All indexes pointed to worsening conditions among oil field services firms", the Fed said in its report, noting that the business activity index plunged from -4.2 in the fourth quarter to -50.9 in the first, the lowest reading in the survey's four-year history.

Both contracts had posted strong gains of more than $1 a barrel earlier in the session.

Crude inventories rose by 1.6 million barrels in the most recent week, the EIA said.

"We are entering into the single worst reset in energy prices in my lifetime", said one respondent.

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.

"This reminds me of the aftermath of the 1998 price crash and what it did to our productive capacity for the next decade", said John Kilduff, a partner at Again Capital Management in NY.



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