Oil prices rallied in Asia Wednesday on signs the US Congress was nearing an agreement on a massive stimulus package to help the coronavirus-ravaged American economy, tracking record Wall Street gains. 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.
Both contracts have hit multi-year lows in recent weeks as lockdowns and travel restrictions to fight the virus hit demand, and with top producers Saudi Arabia and Russian Federation engaged in a price war.
"The canary in the coal mine is chirping", said AxiCorp chief markets strategist Stephen Innes, adding there was an "absence of demand amid rapidly rising physical inventories".
ING revised down on Wednesday its Brent crude price forecast for the second quarter to $20 a barrel from $33, because of the demand shock caused by the coronavirus outbreak and the expected supply surge from Saudi Arabia and Russian Federation in April.
"It will be hard to lift demand if lockdowns are announced in many countries and airline services remain suspended", ANZ analysts said in a note.
Oil prices have fallen 45% so far this month after the Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russian Federation, a grouping known as OPEC+, failed to extend an agreement to cut production and support prices beyond end-March.
"This is giving significant buoyancy to oil prices, at least in the short term", said Commerzbank analyst Eugen Weinberg.
Analysts said in a Reuters poll on Tuesday that US crude oil stockpiles likely built for a ninth successive week, while inventories of refined products were expected to have dropped, with gasoline set to decline for the eighth straight week.