NEW YORK (Reuters) - Oil prices rose on Tuesday but remained below session highs reached after the U.S. Federal Reserve cut interest rates in an emergency move designed to shield the world’s largest economy from the impact of the coronavirus.
FILE PHOTO: A seagull flies in front of an oil platform in the Bouri Oilfield some 70 nautical miles north of the coast of Libya, October 5, 2017. REUTERS/Darrin Zammit Lupi/File Photo
The central bank’s statement said it was cutting rates by a half percentage point to a target range of 1.00% to 1.25%. Crude futures spiked, then pared gains as traders viewed the Fed’s move as a signal that the situation was more serious than many had thought, said Bob Yawger, director of energy futures at Mizuho in New York.
“I think the rate cut was expected to happen this week and while it adds liquidity to the market, it does little to encourage anyone to book a flight anywhere,” said Scott Shelton, an energy broker with ICAP in Durham, North Carolina. “I think the market effects are short lived when it comes to the price of oil.”
Brent crude LCOc1 was up $1.50 a barrel, or 2.7%, at $53.40 by 10:45 a.m. EST (15:45), off the session high of $53.90 a barrel hit immediately after the rate cut. U.S. West Texas Intermediate (WTI) CLc1 was up $1.49 a barrel, or 3.1%, at $48.23 a barrel, after trading as high as $48.66.
Brent and WTI have rebounded over the past two days after sliding more than 20% from their January peak on signs the spread of the coronavirus had dented fuel demand.
The coronavirus, which originated in China, has spread to more than 60 countries and has killed more than 3,000 people globally. In the United States, about 100 people have tested positive.
Other major central banks have promised monetary and fiscal stimulus. Also, G7 finance ministers will discuss how best to cushion the economic impact of the outbreak, French Finance Minister Le Maire said on Monday.
Several members of the Organization of the Petroleum Exporting Countries (OPEC), worried the outbreak could slow oil demand, are mulling a bigger output cut of possibly 1 million barrels per day (bpd), up from the previous proposal for 600,000 bpd.
OPEC and its allies, a group known as OPEC+, are expected to announce deeper output cuts at their meeting on March 5-6 in Vienna. The group had agreed to cut output by 1.7 million bpd in a deal that runs to the end of March.
Leonid Fedun, vice-president of Russia’s second-biggest oil producer Lukoil (LKOH.MM), said OPEC’s proposed additional cut would be enough to lift oil prices back to $60 a barrel. Fedun’s comments suggested Russia may be willing to agree to cut output further.
Oil stockpiles in the United States, the world’s biggest crude producer and consumer, are expected to rise for a sixth week by 3.3 million barrels, while refined product inventories are forecast to fall, according to Reuters poll.
Additional reporting by Noah Browning in London and Devika Krishna Kumar in New York; Editing by Susan Fenton and David Gregorio
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Oil extends gains on expectations for coordinated effort to offset coronavirus impact - Reuters
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