(Bloomberg) -- Oil resumed gains as the U.S. passed an emergency spending bill to combat the impact of the coronavirus, while the two biggest members of the OPEC+ coalition remain divided over deeper output cuts.
Congress on Wednesday authorized nearly $8 billion in spending to fund the American government’s response to the deadly outbreak, spurring a rally in U.S. stocks that extended into Asia. Russia and Saudi Arabia are split over the need for further curbs, with the kingdom pushing for a reduction of 1.5 million barrels a day and Russia in favor of maintaining supply at current levels.
A smaller-than-expected gain in American crude stockpiles has added to optimism as oil rebounds ahead of the OPEC+ meeting in Vienna after slumping 16% last week. Nations across the globe have been forced to inject cash into slowing economies as they struggle to contain the rapidly spreading outbreak, with Goldman Sachs Group Inc. among banks and consultants warning of a significant hit to consumption this year.
OPEC+ doesn’t “have much of a choice but to cut production further if they want to maintain the price support strategy,” said Daniel Hynes, an analyst at Australia & New Zealand Banking Group Ltd. in Sydney. “There are expectations that Russia will eventually come around to the view of Saudi Arabia and other Middle Eastern producers that an extensive cut is required.”
West Texas Intermediate futures for April delivery added 35 cents, or 0.8%, to $47.13 a barrel on the New York Mercantile Exchange as of 7:39 a.m. in London. The contract slipped 0.9% on Wednesday after rising more than 5% over the previous two days.
Brent futures for May gained 0.8% to $51.54 a barrel on the ICE Futures Europe exchange, after ending 1.4% lower on Wednesday. The global benchmark crude was trading at a premium of $4.26 a barrel to the WTI for the same month.
The spending bill approved by Congress is more than triple the amount proposed by U.S. President Donald Trump last week and follows an emergency half-percentage point interest-rate cut by the Federal Reserve on Tuesday. Markets are expecting that China will ramp up stimulus with interest rate cuts, cash injections and more support for struggling companies.
Moscow is likely to wait until the last moment to make any decision on whether to back deeper cuts, Iranian Oil Minister Bijan Namdar Zanganeh said. OPEC+ ministers are scheduled to meet Thursday and Friday. The group is expected to reduce production by 750,000 to 1 million barrels a day and anything less will leave the market “unimpressed,” according to a note from Australia & New Zealand Banking Group.
--With assistance from James Thornhill.
To contact the reporter on this story:
Saket Sundria in Singapore at ssundria@bloomberg.net
To contact the editors responsible for this story:
Serene Cheong at scheong20@bloomberg.net
Ben Sharples, Andrew Janes
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