Oil extends rally as US equities race higher

New York — An overnight oil price rally accelerated in mid-morning US trading Monday, on optimism OPEC+ will deliver further output cuts and amid signs that global central banks will act to support financial markets around the world.

At 1720 GMT, ICE May Brent was up $2.11 at $51.78/b and NYMEX April WTI was $2.05 higher at $46.81/b.

"Oil's freefall appears to be over on expectations that a global central bank response will support risky assets and as energy traders choose to ignore any reluctance from the Russians on deeper production cuts," OANDA senior market analyst Edward Moya said in a note.

NYMEX April ULSD was up 4.04 cents at $1.5177/gal and April RBOB was 4.63 cents higher at $1.5291/gal.

US equity markets opened sharply higher Monday amid expectations that the Federal Reserve would cut its interest rate this month.

The market is now pricing in a 100% chance of the Federal Open Market Committee lowering the Federal Funds target rate 50 basis points to 1-1.25% at its March 18 meeting, according to CME Group analysis. At 1720 GMT, the Dow Jones Industrial Average was up around 600 points after a volatile start.

Meanwhile, there is a growing sense that OPEC and its allies will take action to stabilize prices at its meeting in Vienna later this week. The 23-country group, known as OPEC+, is weighing a recommendation to cut its quotas by another 600,000 b/d. The group's current 1.7 million b/d supply cut agreement expires at the end of March.

Russia, the key non-OPEC partner, has yet to state a detailed position on the OPEC+ agreement going forward. Earlier this month, Russian oil producers indicated they would be willing to extend the current agreement to the end of the second quarter but did not want to cut further.

Russian President Vladimir Putin said Sunday he backed continued oil market cooperation with the alliance but added that the current oil price was acceptable for his country's budgetary needs, indicating some potential hard bargaining at the meeting this week.

Still, concerns over coronavirus hurting demand continued to weigh on oil outlook and price forecasts.

Bank of America, citing fading GDP growth, cut its crude price forecast for 2020 by $8/b in its latest BofA Global Research report. Brent is now forecast to average at $54/b, down from $62/b previously, and WTI is forecast at $49/b.

"The demand destruction for oil is not going to get better anytime soon, but we could still see the beginning of the stabilization for prices," Moya said.