Singapore — 0225 GMT: Crude futures extended gains in mid-morning trade in Asia Wednesday following an overnight rally in US equities on anticipation of new stimulus measures from the US government.
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At 10:25 am Singapore time (0225 GMT), ICE Brent May crude futures were up 87 cents/b (3.20%) from Tuesday's settle at $28.02/b, while the NYMEX May light sweet crude contract was 88 cents/b (3.67%) higher at $24.89/b.
US Senators and the White House continued to negotiate late Tuesday on an estimated $2 trillion stimulus package in response to the coronavirus pandemic, according to media reports.
"Oil prices have clawed back some intraday losses on the anticipation of news from Washington announcing new initiatives to try to protect the economy from the effects of COVID-19," AxiCorp's chief market strategist Stephen Innes said Wednesday. "But the canary in the coal mine is chirping from the products market, with gasoline and jet cracks under significant pressure responding to the absence of demand amid rapidly rising physical inventories," he added.
Demand for jet fuel and gasoline has declined rapidly as multiple governments impose lockdowns and stay-at-home orders in a bid to contain the spread of the pandemic.
India's Prime Minister Narendra Modi Tuesday imposed a nationwide lockdown on the country's 1.3 billion people to slow the spread. India is the world's third biggest energy consumer after China and the US.
Any strong recovery in global oil prices in coming months is likely to be capped as concerns mount of a potential OPEC+ price war after recent talks fell apart.
"A pare-back in production from the OPEC+ and a stabilization in the coronavirus episode are both needed to lift oil prices back to its pre-collapse prices," OCBC analysts said Wednesday.
Globally, up to 5 million b/d of high-cost production volumes were in jeopardy of being shut in if current low oil prices continue for a prolonged period of time, according to Platts Analytics.