Oil prices reverse losses as US government considers aid for sector
Oil prices reversed their losses this afternoon after US government officials indicated that it would provide support to the battered sector.
US standard West Texas Intermediate, which earlier today fell nearly 20 per cent, swung back to stand over three per cent up at $13.21.
The move came after US treasury secretary Steve Mnuchin said that the federal government was considering providing liquidity to oil and gas firms.
Earlier in the day the US Oil Fund announced that it would switch all of its holdings out of the June front month delivery contract, with the sell-off prompting a swift price implosion.
Tweets from President Donald Trump suggesting that parts of the US were beginning to reopen for business may also have inflated prices on hopes of increased demand.
Worldwide benchmark Brent crude also reversed the morning’s decline, increasing 3.5 per cent to climb back above $20.
Rystad Energy’s head of oil markets Bjonar Tonhaugen said that the respite would likely prove temporary:
“US reopening industrial activity can give a temporary boost to prices as traders need space to breath, but we don’t expect the levels to last.
“Oil prices will likely average at $20 per barrel in the second quarter, with the lowest levels coming sometime in May”.
Oil producer cartel Opec is due to begin cutting output by record levels in May, but producers and analysts alike are worried that these will not do enough to deal with the size of the demand overhang.
Tonhaugen said that the market would now expect to see greater quantities of oil shut in as the only way to prop up prices until demand returns.