Oil falls 2% despite a sudden drop in US stocks

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Oil had risen in anticipation of a recovery in fuel demand, as producers cut supplies to reduce supply glut in the midst of the pandemic. But crude today and other high-risk assets, such as stocks, fell today as government signals that the recovery could take time.The price of the global benchmark for Brent was set, down 79 cents, or 2.6%, to $ 29.19 a barrel. US West Texas Intermediate crude futures closed 49 cents, or 1.9%, at $ 25.29 a barrel.

Jerome Powell, the Fed’s Chairman, gave a pessimistic assessment of the US economy, and renewed his skepticism about negative interest rates. “There is a black cloud because of this,” said Bob Yauger, director of energy contracts at Mizuho in New York.The statements were from the negative, so that they dispelled even the impact of the weekly US oil inventory report, which was simply the most calling for a price hike since January.

The US Energy Information Administration said that US crude inventories fell 745 thousand barrels last week, while analysts in a Reuters poll expected to rise 4.1 million barrels.

The US Department of Energy announced on Wednesday that it will buy up to one million barrels of low-sulfur crude for the government’s oil reserve for emergencies, as part of efforts to help producers who are suffering in light of the demand collapse due to the Corona virus.

The move comes after the ministry canceled a previous plan to buy up to 30 million barrels of strategic oil reserves, following Congress’s reluctance to adopt the necessary funding, as lawmakers felt that this would help oil companies during the Corona virus pandemic.

In March, US President Donald Trump directed Energy Secretary Dan Browell to fill the strategic reserve with the last one, and the ministry tried to raise funding for the purchase of 77 million barrels, which would have brought the stock to its maximum capacity of 714 million barrels.

The ministry said, in a statement, that the purchase of up to one million barrels “will test the current conditions of current crude oil available for strategic reserve in exchange for the New York Stock Exchange futures contracts for West Texas Intermediate traded in the financial market.”

(Reuters)

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