Oil Up For 3rd Day: Can It Recover From Coronavirus Swings?
Zacks Investment Research | Mar 25, 2020 10:22PM ET
Oil prices rose on Wednesday after the U.S. Senate approved a $2 trillion emergency stimulus to cope with the economic fallout of the coronavirus pandemic. WTI futures rose by 48 cents, or 2%, to $24.49 a barrel, up for a third session. This followed a forgettable last week for the commodity wherein it tumbled 29% - the biggest since the 1991 Gulf War.
Oil Hit by Double Whammy
Despite the bounce off, there is no denying that oil fundamentals remain firmly bearish. Last week, WTI reached its lowest settlement since February 2002 at $20.37 a barrel, having slumped almost 67% since the beginning of this year.
The fast-spreading novel coronavirus outbreak has triggered an unprecedented selloff in the commodity. In particular, with major cities under lock-down and travel restrictions in place, the consumption for crude is set to drop substantially. Global efforts to combat the pandemic’s impact and rev up economic activity have largely failed so far. The virus-inflicted demand slowdown has led to hefty oil selloff.
Pressure in the oil markets has been exacerbated by the no-holds-barred price war between Saudi Arabia and Russia. The carnage deepened after Saudi Arabia (the OPEC cartel’s biggest producer and exporter) and Russia (leader of the non-OPEC contingent) failed to agree on additional production cuts to boost oil market fundamentals and prop up prices. Subsequently, both countries decided to open the production floodgates, which combined with the demand destruction to send prices into a tailspin.
The carnage sent most energy companies scurrying for cover. Even the so-called supermajors like Chevron (NYSE:CVX) and Royal Dutch Shell (LON:RDSa) Zacks Investment Research
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