Oil rises 2% on Fed steps to support economy

Hopes grow that US will soon reach deal on $2tr coronavirus economic package

NEW YORK: Oil rose about 2% on Tuesday after the US Federal Reserve said it would take step to bolster the economy and on growing hopes the United States will soon reach a deal on a $2 trillion coronavirus economic package.

The market was substantially off the day’s highs, however, and analysts remain pessimistic that oil prices will stage an extended recovery amid the worsening coronavirus pandemic and the ongoing oil price war between Saudi Arabia and Russia. Brent futures gained 77 cents, or 2.8%, to $27.79 a barrel, while US West Texas Intermediate (WTI) crude rose 10 cents, or 0.4%, to $23.46.

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Earlier in the session both Brent and WTI were trading up over 5%. The Fed on Monday rolled out an array of programs that includes backing for corporate bond purchases for the first time. US Treasury Secretary Steven Mnuchin said he was confident that a deal on an aid package would be reached soon as well.

“This is giving significant buoyancy to oil prices, at least in the short term,” said Commerzbank analyst Eugen Weinberg. “It is highly questionable whether the good mood will continue on the oil market, however.”

Published in The Express Tribune, March 25^th, 2020.

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