Oil dropped 11% on Friday, giving back early gains, even as the world’s richest nations poured unprecedented aid into the global economy to stop a coronavirus-driven recession and U.S.
U.S. crude futures for April fell $2.79, or 11.06%, to settle at $22.43 per barrel. Brent crude futures fell $1.49 or 5.2%, to settle at $26.98 per barrel.
Thursday was WTI’s single best day on record.
“The outsized gains by WTI (U.S. crude) reflect the hope and not the reality of the U.S. shale industry,” said Jeffrey Halley, senior market analyst at OANDA.
“Once this reality finally sets in, I expect the rally in oil to disappear as quickly as it began.”
As the spread of the coronavirus brings much of the world to a halt, nations have poured increasing stimulus into their economies while central banks have flooded markets with cheap dollars to ease funding strains.
“Positive risk sentiment and a weaker U.S. dollar are helping crude on Friday. Also, comments from U.S. president Trump that he might get involved in the oil (price) war at an appropriate time is supporting oil,” said UBS oil analyst Giovanni Staunovo.
“My concern relates to the likelihood of more mobility restrictions around the globe, which is likely to weigh further on oil demand. Hence, the worst is probably not over for oil prices.”
U.S. crude and Brent have both collapsed about 40% in the past two weeks since the breakdown of talks between the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, leading Saudi Arabia to ramp up supply.
Trump said on Thursday that he would act on the price war at the appropriate time, saying low gasoline prices were good for U.S. consumers even though they are hurting the industry.
Despite the rise of oil prices on Thursday and Friday, Brent was still on track for a weekly loss of more than 10%, its fourth consecutive weekly decline. (cnbc.com)