Oil gains as governments pile on the economic stimulus
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[March 20, 2020] By
LONDON (Reuters) - Oil prices rose on
Friday as the world's richest nations poured unprecedented aid into the
global economy to stop a coronavirus-driven recession and U.S. President
Donald Trump hinted he may intervene in the price war between Saudi
Arabia and Russia.
Brent crude futures <LCOc1> were up $2.12, or 7.4%, at $30.59 a barrel
by 1012 GMT.
U.S. crude futures for April <CLc1> rose $2.23 to $27.45. The
front-month contract expires later on Friday. The more active U.S. crude
contract for May <CLc2> was up $2.29, or 8.8%, at $28.20.
Both U.S. contracts gained more than Brent because of U.S. plans to buy
up to 30 million barrels of crude for its emergency stockpile by the end
of June and reports that regulators in Texas might curtail output.
"The latest bout of price strength is unlikely to have the legs to carry
on. The world is awash with oil," said Stephen Brennock of oil broker
PVM. "Simply put, oil is facing a prolonged period of demand
As the spread of the coronavirus brings much of the world to a halt,
nations have poured increasing stimulus into their economies while
central banks have flooded markets with cheap dollars to ease funding
Sources told Reuters that China was set to unleash trillions of yuan of
fiscal stimulus to revive an economy facing its first contraction in
"Positive risk sentiment and a weaker U.S. dollar are helping crude on
Friday. Also, comments from U.S. president Trump that he might get
involved in the oil (price) war at an appropriate time is supporting
oil," said UBS oil analyst Giovanni Staunovo.
"My concern relates to the likelihood of more mobility restrictions
around the globe, which is likely to weigh further on oil demand. Hence,
the worst is probably not over for oil prices."
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The sun sets behind a crude oil pump jack on a drill pad in the
Permian Basin in Loving County, Texas, U.S. November 24, 2019.
U.S. crude and Brent have both collapsed about 40% in the past two weeks since
the breakdown of talks between the Organization of the Petroleum Exporting
Countries (OPEC) and its allies, including Russia, leading Saudi Arabia to ramp
Trump said on Thursday that he would act on the price war at the appropriate
time, saying low gasoline prices were good for U.S. consumers even though they
are hurting the industry.
"This is because the low prices are threatening to hit the U.S. shale oil
industry hard, thereby jeopardizing the U.S. position as the world's largest oil
producer," Commerzbank analyst Carsten Fritsch said.
Despite the rise of oil prices on Thursday and Friday, Brent was still on track
for a weekly loss of more than 10%, its fourth consecutive weekly decline.
Supply restraint by core OPEC producers could push up second-quarter Brent
prices to $30 a barrel, while U.S. measures to support the market could underpin
prices in the near term, Goldman Sachs said in a research note.
(Reporting by Bozorgmehr Sharafedin in London; Additional reporting by Koustav
Samanta in Singapore; Editing by David Goodman and Jason Neely)
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