(Bloomberg) -- Oil traded little changed as concerns about oversupply and disintegrating demand overshadowed efforts by U.S. leaders to support the world’s largest economy.
Futures in New York pared gains after rising as much as 7.7%. House Speaker Nancy Pelosi said she’s optimistic that Congress will reach a deal on a massive stimulus measure, a day after the Federal Reserve unveiled a sweeping set of economic measures. Meanwhile, top trading house Gunvor Group Ltd. estimated that the global crude surplus stood at 14 million to 15 million barrels a day as the coronavirus pandemic obliterates demand.
“Stimulus helps sentiment but as long as we keep seeing lockdowns, it’s going to fuel the question of how deep does the demand destruction go,” said Ian Nieboer, managing director at RS Energy Group, now part of Enverus. “At the same time, more barrels are hitting the market. The path for recovery is still very uncertain.”
American lawmakers haven’t yet reached a deal to shore up the U.S. economy, which has started showing signs of weakness from the virus-induced fallout. A gauge of activity at service providers and manufacturing contracted the most on record on Tuesday. The U.S. Central Bank said Monday it would buy unlimited amounts of Treasury bonds and mortgage-backed securities, and set up programs to ensure credit flows to corporations.
Oil markets have turned bearish with the benchmark for global physical supply at its weakest since 2002 on Monday, while gasoline in the U.S. crashed. IHS Markit estimates that global oil demand in the second quarter will contract by 14 million barrels a day, while Sanford C. Bernstein & Co. forecasts consumption could drop by as much as 20% this half.
See also: As OPEC Pursues Oil Supply War, Here’s Who Has Most Firepower
Oil refiners across the U.S. are having to throttle back operations amid the historic plunge in gasoline demand and prices. In Chicago, wholesale motor-fuel prices fell to just 15 cents a gallon, less than a fistful of bubble gum. Meanwhile, OPEC producer Nigeria offered to sell its crude in April at unusually large discounts, and traders said the country may not have gone cheap enough.
Those discounts are set to force crude into storage, though traders may find they can’t fill tanks quickly enough, Citigroup Inc. analysts wrote in a report. As a result, the oil futures curve is set to weaken further, they said, testing the ability of producers to keep pumping.
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