Futures Movers: U.S. oil prices under pressure as U.S. stimulus package fails to dispel fears of demand crunch

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Oil futures traded on a mixed note Thursday, with global crude prices edging higher, but U.S. oil prices down as traders remained focused on the hit to energy demand from the global COVID-19 pandemic.

“Oil is waiting for a fresh directional catalyst to make its next major move up or down,” said Lukman Otunuga, senior research analyst at FXTM. “The commodity has depreciated 60% since the start of 2020 thanks to the coronavirus outbreak and [an] aggressive price war between Saudi Arabia and Russia.”

With the current agreement between the Organization of the Petroleum Exporting Countries and non-member allies such as Russia expiring on March 31, “there may be more pain on the cards for the commodity as members of the cartel raise production,” Otunuga told MarketWatch.

“At this point in time anything is possible in the oil markets, with $15 a potential target [for WTI] if nothing changes,” he said. “If global economic conditions continue to worsen through Q2” and Russia and Saudi Arabia continue with this price war, that level may be reached by the end of June.

West Texas Intermediate crude for May delivery CL.1, -3.96%  fell 684 cents, or 3.4%, to $23.65 a barrel on the New York Mercantile Exchange. The front-month May Brent crude BRNK20, -0.88%, however, edged up by 14 cents, or 0.5%, to $27.53 a barrel on ICE Futures Europe.

Oil gained ground Wednesday, with support tied to expected Senate passage of a $2 trillion U.S. economic stimulus package. The Senate, after a late snag, passed the legislation, sending it to the House, where it’s expected to win quick approval and then land on the desk of President Donald Trump, who has vowed to sign it.

But oil will struggle to recover from a price collapse sparked by the pandemic and a global price war between Russia and Saudi Arabia that is flooding the world with crude, analysts said.

“In addition to storage constraints, it remains challenging to call a floor in the oil price,” said Stephen Innes, chief global market strategist at AxiCorp. “I expect a high level of volatility as the market responds to news flow, both positive and negative. Still, we should probably continue to expect that an extended period of oil pricing in the $20s is possible with an occasional deep dive lower on storage constraints and inventory builds.”

Meanwhile, the U.S. Energy Department withdrew a March 19 tender for the first part of a plan to buy 77 million barrels of oil for the Strategic Petroleum Reserve as the Trump administration failed to win funding for the purchase from Congress, according to Bloomberg News. Following a steep decline in oil prices, President Donald Trump had announced on March 13 that the U.S. would buy large quantities of oil to fill the SPR.

In other energy trading, April gasoline RBJ20, +10.26%  climbed by 9.1% at 59.65 cents a gallon, while April heating oil HOJ20, -2.22%  was down 1.7% at $1.0788 a gallon.

April natural gas NGK20, -1.75%  was down 2.2% at $1.623 per million British thermal units, ahead of the contract’s expiration at the end of Friday’s trading session.

The U.S. Energy Information Administration reported Thursday that domestic supplies of natural gas fell by 29 billion cubic feet for the week ended March 20. That was generally in line with the 27 bcf average decline expected by analysts polled by S&P Global Platts.

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