Oil stays below $30 with gains being extended

Oil rose further Friday after a dramatic rebound from multi-year lows. It stayed below $30 a barrel on fears the deadly coronavirus will push the world into recession with an oversupply.

US benchmark West Texas Intermediate (WTI) was up 3.65% to $26.14 a barrel in midday Asian trade.

Brent climbed 2.14% to $29.08 a barrel.

US government moves

On Thursday, WTI rebounded by more than 23% following US government moves to help American crude producers weather a slump in demand caused by the coronavirus pandemic, recovering almost as spectacularly as it had plunged in recent days.

Crude slumped to 18-year lows Wednesday. This is with travel restrictions and other measures aimed at combating the virus hitting demand. Besides, major producers Saudi Arabia and Russia locked in a price war by ramping up production.

“Oil prices are recovering as the three-day collapse saw some bottom fishing. This is after WTI failed to break the $20 a barrel level,” said OANDA senior market analyst Edward Moya.

“The oil rebound also extended higher after (US) President (Donald) Trump stated he would get involved in the oil price war at the appropriate time,” Moya said in a note. “The Trump administration is now showing signs they will try to defend the shale industry and stabilise oil prices.”

The US Department of Energy said Thursday it will carry out Trump’s directive to top up the Strategic Petroleum Reserve to its maximum capacity.

The department said in a statement on its website it will buy a total of 77 million barrels from American producers, kicking off with an initial purchase of 30 million barrels.

Collapsing demand hammered oil markets as the virus prompts sweeping travel restrictions and business closures. Moreover, major producers Saudi Arabia and Russia engage in a price war.

The US energy department “is moving quickly to support US oil producers facing potentially catastrophic losses from the impacts of COVID-19. Besides, the intentional disruption to world oil markets by foreign actors,” said US Energy Secretary Dan Brouillette.

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