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Oil prices rise giving stocks support after ‘Black Monday’

Issued on: 10/03/2020 – 03:23Modified: 10/03/2020 – 03:23

Oil prices jumped more than 6% on Tuesda..

By admin , in Health , at March 10, 2020

Issued on: Modified:

Oil prices jumped more than 6% on Tuesday, clawing back some ground on hopes that a price war by top producers Saudi Arabia and Russia that sparked the biggest daily rout since the 1991 Gulf War will not be sustained.


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U.S. shale producers also rushed to deepen spending cuts and could reduce future production after OPEC's decision to pump full bore into a global market hit by shrinking demand due to the coronavirus outbreak.

Brent crude futures rose $2.31, or 6.7%, to $36.67 a barrel by 0115 GMT, while U.S. West Texas Intermediate (WTI) crude gained $1.79, or 5.8%, to $32.92 a barrel following declines of nearly 25 percent on Monday.

Both benchmarks dropped to their lowest since February 2016 in the previous session and recorded their biggest one-day percentage declines since Jan. 17, 1991, when oil prices fell at the outset of the U.S. Gulf War.

Trading volumes in the front-month for both contracts hit record highs in the previous session, after a three-year pact between Saudi Arabia and Russia and other major oil producers to limit supply fell apart on Friday.

"When you look at the leverage the industry is in, at prices of around $30, it's not profitable," said Jonathan Barratt, chief investment officer Probis Group.

"Saudis and other Middle Eastern producers have their budgetary constraints, Russia is starved for cash and the breakeven for .. shale has to be around $50 a barrel. So the dynamics of all those put together will mean they will come to an agreement somewhere."

But analysts do not expect oil prices to quickly regain the nearly 25% slump from Friday's close as the coronavirus outbreak cuts demand.

"Oil prices rarely stay below the marginal cash cost of supply. But with the anticipated inventory build in (the first half) we struggle to find conviction in a snap back for oil," analysts from Bernstein Energy said in a note.

Energy stock prices have also fallen sharply, and shale producers began cutting spending in anticipation of lower revenues. Exxon shares lost more Read More – Source