Oil prices slipped into negative territory on Wednesday as faltering fuel demand from the spread of the coronavirus outweighed a massive pending U.S. economic stimulus package.
Brent crude was down 92 cents, or 3.4%, at $26.24 per barrel after earlier rising to a high of $28.29. U.S. crude was down 34 cents, or 1.42%, at $23.67 after earlier hitting a high of $25.24 per barrel.
U.S. senators and Trump administration officials have reached an agreement on the $2 trillion stimulus bill which is expected to be passed through the Congress later on Wednesday.
Still, demand for oil products, especially jet fuel, is falling worldwide as more governments announce nationwide lockdowns, putting a lid on oil price gains.
“Although oil futures are getting a sentiment-led boost this morning, the challenge for the physical oil market is a looming and growing oversupply which will cause a ‘nowhere to hide’ situation very soon,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy.
Refineries globally are responding to the fall in demand by reducing output, with plants in India the latest cut crude processing, while ports in the country could face delays to crude discharging amid new measures to curb the spread of the virus.
India, the world’s second most populous country and the third largest oil consumer, has entered a 21-day government enforced lockdown.
ING on Wednesday slashed its Brent crude price forecast for the second quarter to $20 a barrel from $33 due to the coronavirus outbreak and an expected supply surge from Saudi Arabia and Russia from April.
Oil prices have fallen by more than 45% this month after the Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russia, a grouping known as OPEC+, failed to agree on extending output cuts beyond March 31.
In the United States, crude inventories fell by 1.2 million barrels in the week to March 20 to 451.4 million barrels, compared with analysts’ expectations for a build of 2.8 million barrels, data from the American Petroleum Institute showed on Tuesday.
Gasoline and distillate stocks also fell last week, API said.
Official data from the Energy Information Administration is expected on Wednesday.