Oil Continues Its Strong Rally With “Incentive” Optimism
Oil prices continue to rally with optimism that a strong incentive package will be implemented in the USA
Oil prices moved their rally to the third day with the optimism that the incentive package would be implemented in the US, but the lack of a sign that the price war is weakening remains on the market.
Futures contracts increased this week to 10 percent in New York, after a spokesperson for House of Representatives Nancy Pelosi agreed to reach an agreement on Congress’s intense incentive package. On the other hand, a series of economic measures announced by the Fed on Monday was another factor supporting prices. These efforts also led to strong increases in stocks, and the Standard & Poor’s 500 (S&P 500) Index had its best session since 2008.
However, the collapse of demand due to coronavirus and the increase in the amount of oil in the market with the price war prevents the recovery in prices from being sustainable. This situation reflects the six-month time difference in Brent oil with the highest contest (the long-term contract is cheaper than the short-term contract). This development signals excessive supply.
While much of the world economy is closed to prevent the spread of the coronavirus epidemic, neither Saudi Arabia nor Russia is stepping back from its threats to pump more oil to increase its market share. Gunvor Group Ltd., one of the major brokerage houses, estimates that the surplus of crude oil is around 14 to 15 million barrels a day across the world, while two of the world’s largest oilfield service companies pointed out that there may be drastic drops in US rock oil production.
“Oil is priced at $ 20,” said CMC Markets Asia Pacific chief market strategist, “but we cannot say that prices have yet made a base, there is a possibility of delaying the introduction of incentives in the US.”
May-term West Texas oil (WTI) rose 3.8 percent higher on the Nymex market after closing 2.8 percent higher on Tuesday, climbing to $ 24.91 a barrel at 13:00 a.m. Singapore time.
Brent for May futures rose 3 percent to $ 27.97 a barrel on the London-based ICE Futures Europe market after closing 0.4 percent above Tuesday. The global indicator traded with Brent oil and a premium of $ 3.06 according to the US indicator WTI.