Oil prices rise, capping week of historic turmoil over coronavirus

Oil prices climbed on Friday, adding to gains from earlier sessions after producers such as Kuwait said they would move to cut output and the United States approved another package to cope with the turmoil caused by the coronavirus outbreak.

Brent crude LCOc1 was up 24 cents, or 1.1%, at $21.57 by 0622 GMT, after rising more than $1 earlier and jumping 5% on Thursday. U.S. oil CLc1 was up 38 cents, or 2.3%, at $16.88 a barrel, having surged 20% in the previous session.

Barring a sharp jump later in the session, though, prices are heading for their eighth weekly loss in the last nine, capping one of the most tumultuous weeks in the history of oil trading. Brent is headed for a more than 20% loss this week, with U.S. West Texas Intermediate (WTI) set for a fall of around near 8%.

WTI fell into negative territory to minus $37.63 a barrel on Monday, while Brent dropped to a two-decade low.

The gains in recent days “in no way mitigate the size of the week’s sell-offs or the supply/demand imbalance globally that has brought us to this point,” said Jeffrey Halley, senior market analyst at OANDA.

“Further strong rallies from this point will be challenging without clear signs that peak virus is upon us,” he said.

Under a deal agreed between the Organization of the Petroleum Exporting Counties (OPEC) and associated producers including Russia, a grouping known as OPEC+, output cuts of 9.7 million barrels per day (bpd) are due to kick in from May.

But Kuwait’s state news agency KUNA said on Thursday the OPEC producer will begin cutting supplies to international markets without waiting for the official start of the deal.

Azerbaijan’s Azeri-Chirag-Guneshli oil project will also have to cut output sharply from May onwards to fulfil the country’s commitments under the deal, four sources told Reuters.

On the demand side, in China where the coronavirus outbreak started late last year, analysts said fuel sales should pick up in the second quarter as the government eases curbs to contain the pandemic.

Meanwhile, U.S. legislators approved a nearly $500 billion bill for relief from the pandemic, providing support to small businesses and hospitals. The package raises U.S. spending on the crisis to nearly $3 trillion.

Still, the global economy may see a record contraction this year, according to a Reuters poll.

“The disruption relating to the coronavirus is set to cause the steepest fall in global GDP since the Second World War,” Capital Economics said in a note, forecasting a 5.5% contraction in global economies this year, dwarfing the 0.5% fall seen during the global financial crisis in 2008.

“Once the virus is under control, (economic) output should rebound, but it will take years to return to its pre-virus path,” it said.