Oil prices stage rebound after days of relentless selling - MarketWatch

Oil prices bounced off their lowest levels in 20 years on Thursday, as investors absorbed a huge influx of central bank and government support measures against economic fallout from the coronavirus and Russia indicated it would like to see higher prices.

Thursday’s climb for oil is “more symbolic of the volatility that should continue to rattle global markets, rather than a clear signal that prices are ready for a sustained rebound of recent lows,” said Robbie Fraser, senior commodity analyst at Schneider Electric.

Read:Dismal oil demand outlook, Saudi-Russian price war lead to ‘atomic bomb’-like environment for oil

The front-month April West Texas Intermediate crude contract CLJ20, +16.98%, the U.S. benchmark, rose $3.07, or 15%, to $23.44 a barrel. On Wednesday, the contract plunged more than 24%, to settle at $20.37 a barrel on the New York Mercantile Exchange, for the lowest finish since Feb. 20, 2002. Adjusted for inflation, oil traded around the lowest level since March 1999, according to Dow Jones Market Data.

Global benchmark May Brent crude BRNK20, +6.51% rose $1.19, or 4.8%, to $26.07 a barrel. On Wednesday, the contract fell $3.85, or over 13%, to finish at $24.88 a barrel on ICE Futures Europe, for its lowest settlement since May 8, 2003.

The move for oil “comes as central banks around the world continue to offer major supportive measures to global financial markets, albeit with sometimes limited initial market reaction,” said Fraser.

The Federal Reserve late Wednesday announced more moves to stabilize U.S. financial markets rocked by the sudden pullback of economic activity stemming from the deadly coronavirus outbreak. The Fed widened support to include money market mutual funds.

And the European Central Bank launched a fresh, expanded plan to buy up to 750 billion euros ($820 billion) in government and private sector bonds and commercial paper by the end of the year. That’s days after last week’s stimulus efforts by the central bank. Australia’s central bank cut its interest rates for a second time in March.

“Of course it’s a low [oil] price, we would like to see it higher,” Kremlin spokesman Dmitry Peskov reportedly said on a conference call Wednesday, though he did not suggest a deal with the Organization of the Petroleum Exporting Countries and its allies, led by Russia. Oil-producing nations failed to reach an agreement in early March to further curb oil production levels, and Saudis and Russians have been locked in a price war that has roiled energy and equity markets.

“Saudi Arabia appears determined to continue ongoing efforts to boost exports in a bid to pressure Russia and seize market share from higher cost producers,” said Fraser. “While US shale is expected to see slowdowns on a lagged basis, Canada may see more immediate losses as much of the country’s output faces both higher breakeven costs and lower product value relative to US production.”

Though oil prices rose, equity markets saw mixed trading, with the Dow Jones Industrial DJIA, +1.02% dow by more than 200 points in Thursday dealings, but the Nasdaq COMP, +3.10% trading a bit higher.

The Dow closed under 20,000 for the first time since 2017 on Wednesday, but off session lows after Congress passed the first of two planned measures aimed at easing economic damage the coronavirus pandemic is inflicting on businesses and consumers.

“Even if global production remains static over the near term, let alone factoring in Saudi Arabia increased supply, inventories will swell as gas and oil demand drops precipitously in the weeks ahead of when physical storage facilities are filled to the brim around the world,” said Stephen Innes, chief market strategist at AxiCorp, in a note to clients.

“In this situation, it’s unclear if a point of equilibrium even fits into this scenario. As once the swift and savage physical rebalancing takes place, the markets could quickly fall to WTI $15 or even further, which is now becoming the base case for some,” he said.

On Nymex, prices for petroleum products followed oil higher. April gasoline RBJ20, +1.31% added 1.6% to 64.76 a gallon after settling Wednesday at the lowest front-month contract price on record, based on data going back to 2005, according to Dow Jones Market Data.

April heating oil HOJ20, +2.59% rose 1.7% to 97.01 a gallon, a day after settling at the lowest since January 2016.

Natural-gas prices headed higher, looking to recoup of minor portion of their more than 7% loss from Wednesday, when it settled at its lowest since September 1995.

The U.S. Energy Information Administration reported Thursday that domestic supplies of natural gas fell by 9 billion cubic feet for the week ended March 13. Analysts, on average, expected a decline of 8 billion cubic feet, according to a poll conducted by S&P Global Platts.

April natural gas NGJ20, +2.30% traded at $1.626 per million British thermal units, up 2.2 cents, or 1.4%.

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2020-03-19 15:23:36Z
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