Oil rose over 3% on Tuesday after the U.S. Federal Reserve said it would take steps to bolster the economy and on growing hopes the United States will soon reach a deal on a US$ 2 trillion coronavirus economic package.
The market was substantially off and analysts remained pessimistic that oil prices would stage an extended recovery amid the worsening coronavirus pandemic and the ongoing oil price war between Saudi Arabia and Russia.
Brent futures rose 83 cents, or 3.1%, to US$ 27.86 a barrel by 11:12 a.m. (1512 GMT), while U.S. West Texas Intermediate (WTI) crude rose 34 cents, or 1.5%, to US$ 23.70.
Earlier in the session both Brent and WTI were trading up over 5%. Gasoline futures, meanwhile, soared over 30% earlier in the session and were trading up around 24%.
”The energy complex is posting a strong rebound on Fed unlimited QE (Quantitative Easing) and expectations for a major U.S. fiscal package today,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.
The Fed on Monday rolled out an array of programs including backing for corporate bond purchases for the first time. Senior Democrats and Republicans said on Tuesday they were close to a deal on a US$ 2 trillion stimulus package.
The price of oil has halved in 2020, hit by the demand shock caused by the coronavirus pandemic and efforts to contain it, and removal of supply limits by the Organization of the Petroleum Exporting Countries and other producers when a deal by OPEC and allies including Russia fell apart in early March.
Saudi Arabia now plans to boost exports, although they have yet to increase in March, sources at companies that track oil flows said on Monday.
The latest round of weekly U.S. oil reports are expected to show crude inventories rose for a ninth straight week.
Industry group the American Petroleum Institute (API) is scheduled to release its supply report, followed by the U.S. government's figures on Wednesday.