Oil Futures Gain on Relief Package

WASHINGTON (DTN) -- Nearest delivery oil futures on New York Mercantile Exchange and Brent crude on Intercontinental Exchange settled higher for the second straight session Wednesday. Futures were bolstered by progress in a massive relief package aimed at supporting the U.S. economy against the coronavirus-inflicted slowdown, although weekly inventory data showing another build in U.S. crude oil stocks and large drop in fuel demand last week capped the upside.

In the market-on-close trade, NYMEX May West Texas Intermediate futures clawed back $0.48 to $24.49 per barrel (bbl) after government data showed nationwide crude oil stocks increased for the ninth consecutive week through the period ended March 20. Data reported U.S. commercial crude oil inventories built 1.6 million bbl during the reviewed week to an 8 1/2-month high 455.4 million bbl. In MOC trade, ICE May Brent reversed off intrasession lows to settle at $27.39 bbl.

NYMEX April ULSD futures advanced 1.73 cents for a $1.0978 settlement, likely drawing support from a 10th consecutive weekly drawdown from nationwide distillate stocks, down 678,000 bbl to a 15-week low 124.4 million bbl. Demand for distillate fuels slumped lower last week, down 218,000 barrels per day (bpd) or 5.4% to 3.795 million bpd, while production increased to a four-week high at 4.838 million bpd.

Inventory data for gasoline was exceptionally bearish in this week's government dataset although widely expected amid "shelter-in-place" directives, with the front-month RBOB contract rallying 10.31 cents to $0.5468 gallon, up from a $0.3760 21-year spot low traded Monday.

EIA figures showed demand for motor gasoline in the United States sank 859,000 bpd or 9% during the week ended March 20 to 8.837 million bpd, while four-week average was 1.2% above the corresponding four-week period last week. Gasoline demand is expected to continue lower in the coming weeks.

Overall, fuel demand fell by nearly 2.1 million bpd in the reviewed week, unsurprising amid the widespread demand destruction caused by the coronavirus pandemic.

U.S. equities turned higher Wednesday after a volatile start to the trading session, led by strong gains in airline and tech stocks. The market's first back-to-back rally in more than a month was spurred by the Senate's progress in reaching a bipartisan deal to inject $2 trillion into the U.S. economy to forestall a recession.

Dow Jones Industrials surged over 1,200 points on Wednesday and S&P 500 was up 1.5%. After reaching the agreement, U.S. Senate Majority Leader Mitch McConnell said the unprecedented amount of cash would be a "wartime level of investment into our nation."

If approved by both Houses of Congress later Wednesday and then signed into law by President Donald Trump, the bill will provide around $500 billion in direct corporate loans and a further $500 billion in immediate cash to millions of American taxpayers.

At the same time, the coronavirus pandemic that has sickened over 250,000 people and killed nearly 20,000 around the world, continues to wreak havoc on the global economy, shutting down countries critical to the global supply chain.

India declared Tuesday a nationwide lockdown for the duration of 21 days in what has become be the largest lockdown in human history. Italy once again saw a jump in its daily death toll following two straight days of declines, the nation's health authorities said Wednesday. In the United States, coronavirus-related death toll has also been rising exponentially to top 800 early Wednesday after eclipsing 600 on Tuesday.

Liubov Georges can be reached at liubov.georges@dtn.com

(CZ)

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