Rail wagons for oil cargo stand in sidings at the RN-Tuapsinsky refinery, operated by Rosneft in Tuapse, Russia, on Monday. Picture: BLOOMBERG/ ANDREY RUDAKOV
Rail wagons for oil cargo stand in sidings at the RN-Tuapsinsky refinery, operated by Rosneft in Tuapse, Russia, on Monday. Picture: BLOOMBERG/ ANDREY RUDAKOV

Singapore — Oil prices extended gains for a third session on Wednesday, rising alongside broader financial markets on hopes that Washington will soon approve a huge aid package to stem the economic effects of the coronavirus pandemic.

US crude touched a high of $25.24 a barrel early in the session and was at $24.82 a barrel, up 81c, or 3.4%, by 0412 GMT. Brent crude was trading up 75c, or 2.8%, at $27.90 a barrel after rising to a high of $28.29.

The US Congress may vote on Wednesday on the $2-trillion stimulus after Republicans and Democrats said they were close to a deal, with optimism about the package fuelling a surge in stock markets. Still, demand for oil products, especially jet fuel, is falling worldwide as more governments announce nationwide lockdowns to curb the spread of the coronavirus, putting a lid on oil price gains.

“It will be difficult to lift demand if lockdowns are announced in many countries and airline services remain suspended,” ANZ analysts said in a note.

The market is also facing the threat of increased supplies after the Organisation of the Petroleum Exporting Countries (Opec) and other producers, including Russia, a grouping known as Opec+, failed to extend an agreement to cut production and support prices beyond end-March.

Oil prices have fallen about 45% so far in March.

“A pareback in production from the Opec+ and a stabilisation in the coronavirus episode are both needed to lift oil prices back to its pre-collapse prices,” analysts at OCBC Bank said in a note.

In the US, 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 industry group the American Petroleum Institute showed on Tuesday. Petroleum and distillate stocks also fell last week, API said.

Analysts said in a Reuters poll on Tuesday it is likely that US crude oil stockpiles have built for a ninth successive week, while inventories of refined products were expected to have dropped, with petrol set to decline for the eighth straight week.

The weekly report from the Energy Information Administration (EIA) is due on Wednesday.

Reuters