Oil Prices Up on Drop in Supply

Oil prices rally on hopes for US stimulus

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are under pressure Wednesday as the coronavirus pandemic continues to slow economic growth and oil demand while Saudi Arabia and Russian Federation kept up their battle for market share with an aggressive price war.

Brent LCOc1 futures rose 12 cents, or 0.4%, to settle at $27.15 a barrel.

West Texas Intermediate (WTI) crude futures rose 55 cents, or 2.3%, to $24.56 a barrel, a 2.3% gain.

The US Congress may vote on Wednesday on the $2 trillion stimulus package which boosted stock markets on Tuesday.

API estimated a surprise draw of 1.247 million barrels in the USA crude oil inventory for the week ending March 21, with a build of 2.774 million barrels.

But some analysts struck a note of caution, as demand continues to decrease with more countries imposing lockdowns to curb the spread of COVID-19 while Saudi Arabia and Russian Federation are also no closer to ending their price war.

The outlook has turned "extremely pessimistic" amid the coronavirus pandemic, a survey by the Dallas Federal Reserve Bank of oil and gas companies showed on Wednesday.

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India, the world's second most populous country and the third largest oil consumer, has entered a 21-day government enforced lockdown.

Crude inventories rose by 1.6 million barrels in the most recent week.

"All indexes pointed to worsening conditions among oil field services firms", the Fed said in its report, noting that the business activity index plunged from -4.2 in the fourth quarter to -50.9 in the first, the lowest reading in the survey's four-year history.

The end of the deal would allow Saudi Arabia, Opec's de facto leader, to race Russian Federation to increase oil production in a bid to grab a greater share of the market.

Distillate inventories were also down, by 1.90 million barrels for the week.

"These busts like this can be long lasting in the oil industry".

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