TOKYO: Oil prices rose on Thursday but pared early gains as investors tried to assess how effective massive stimulus by central banks will be in shoring up the global economy as the shock from the coronavirus pandemic deepens.
Bucking panic selling in other financial markets, Brent crude LCOc1 was up 37 cents, or 1.1 per cent at $25.25 a barrel by 03:55 GMT, having earlier risen to $27.19. The global benchmark slumped 13 per cent on Wednesday in a third day of relentless selling.
US oil CLc1 gained $1.44, or 7.1 per cent, to $21.81 after surging nearly 20 per cent earlier. The US benchmark dropped nearly 25 per cent in the previous session.
“After a 24 per cent crash, oil prices are firming up on some selling exhaustion and as US and European leaders unleash ... aid and stimulus,” said Edward Moya, senior market analyst at OANDA in New York. Among the latest moves by a major central bank to try to mitigate the spiralling economic and financial fallout from the epidemic, the European Central Bank kicked off a 750 billion euro ($820 billion) emergency bond purchase scheme after an unscheduled meeting on Wednesday.
Japan is considering handing out cash to households as it faces the likelihood of recession after a sharp contraction of growth even before the outbreak, while South Korea and Australia also took action.
“Monetary and fiscal stimulus will do little in returning energy demand back to normal but it will build confidence that global economy will be in a better position once it is behind the virus,” Moya said.
Analysts are also slashing estimates for China, where the coronavirus outbreak originated, to the lowest since the Cultural Revolution came to an end in 1976, in a further grim outlook for the world’s second-largest economy and oil demand. — Reuters