Oil prices settle higher despite sinking demand
NEW YORK — US crude prices settled higher on Wednesday, bolstered by progress on a massive pending US economic stimulus package, even as government data showed the coronavirus pandemic started undercutting US fuel demand last week.
Demand for oil products, especially jet fuel, is falling dramatically as governments globally announce nationwide lockdowns to slow the spread of the coronavirus.
Fuel demand is expected to fall sharply worldwide in the second quarter with aviation largely at a halt and road travel severely curtailed. Most recently, India, the world’s second-most populous country and the third-largest oil consumer, entered a 21-day lockdown.
US weekly gasoline product supplied — a proxy for demand — dropped 859,000 barrels per day (bpd) to 8.8 million bpd last week, the biggest one-week decline since September 2019, according to the US Energy Information Administration. Overall fuel demand fell by nearly 2.1 million bpd for the week.
West Texas Intermediate (WTI) crude futures rose 48.00 cents to settle at $24.49 a barrel, a 2% gain.
Brent crude rose 24 cents or 0.9% to settle at $27.39 a barrel.
US senators and Trump administration officials have reached agreement on a $2-trillion stimulus bill that Congress was expected to pass on Wednesday, helping to boost markets.
The chief executive of the world’s biggest oil trader, Vitol Group, estimated a demand loss of 15 million to 20 million bpd over the next few weeks.
The US energy sector is slashing capital spending and jobs, with capital expenditures at most shale companies expected to drop by at least 30%.
The outlook has turned “extremely pessimistic” amid the coronavirus pandemic, a survey by the Dallas Federal Reserve Bank of oil and gas companies showed on Wednesday. The Dallas Fed said its 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.
“We are entering into the single worst reset in energy prices in my lifetime,” said one respondent. Another said they were in “survival mode now.” —