Oil Rallies But Still Posts Historic March Drop
March 31 2020 - 3:41PM
Dow Jones News
By Amrith Ramkumar
U.S. oil prices rose Tuesday, paring some of their slide from a
day earlier but still recording their largest drop in any month
ever as the coronavirus crisis dents fuel demand.
U.S. crude futures rose 1.9% to $20.48 a barrel on the New York
Mercantile Exchange, a day after crashing to a fresh 18-year low.
Prices ended Tuesday down 54% for the month and 66% for the
quarter, their largest monthly and quarterly drops ever, according
to a Dow Jones Market Data analysis of figures going back to
1983.
Brent crude, the global gauge, edged down 0.1% to $22.74 a
barrel on the Intercontinental Exchange on Tuesday.
Oil markets have been battered by the coronavirus, which has
sapped demand as travel around the world grinds to a halt and
people consume less fuel. At the same time, a price war between
Saudi Arabia and Russia over their share of global energy markets
threatens to make the glut of oil even more severe.
The crash in prices is a major threat to energy producers around
the world, including U.S. shale companies. President Trump and
Russian President Vladimir Putin held a call Monday in which they
agreed on the importance of stability in energy markets. Meanwhile,
Texas regulators are considering curtailing the state's output for
the first time in decades to help prices stabilize.
But even those measures might not be enough to boost oil,
analysts say, with estimates of the demand drop now climbing as
high as 20 million to 30 million barrels a day.
"Even an entirely illusionary production cut of 5 million
barrels a day would hardly overcome the real problem," Commerzbank
analysts said in a note to clients.
Tuesday's gains for oil came with other raw materials climbing
too after figures showed an official gauge of China's manufacturing
activity rebounded strongly in March as work resumption picked up.
That is an encouraging sign for traders because China is the
world's largest consumer of commodities.
Front-month copper futures rose 3.6% to $2.24 a pound, also
trimming a sliver of their recent declines. They fell 20% for the
quarter, the largest such drop since 2011.
China's economic shutdown earlier in the year to stop the spread
of the virus began denting demand for oil and other materials such
as copper, starting a downward spiral in prices that has continued
with the pandemic spreading around the world.
Some analysts are still skeptical the global economy can quickly
bounce back, with the Trump administration extending
social-distancing guidelines in the U.S. through the end of April
and many other countries taking similar steps.
Write to Amrith Ramkumar at amrith.ramkumar@wsj.com
(END) Dow Jones Newswires
March 31, 2020 15:26 ET (19:26 GMT)
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