Oil falls as sinking demand outweighs stimulus hopes

Oil prices fell on Thursday, ending three sessions of gains, as movement restrictions worldwide to contain the coronavirus destroyed demand and overshadowed expectations that a US $2 trillion emergency stimulus will bolster economic activity.

Brent crude futures fell $1.04, or 3.75 per cent, to $26.35 a barrel by 0834 GMT. West Texas Intermediate (WTI) crude futures fell 94 cents, or 3.8 per cent, to $23.55 a barrel. Both contracts are down about 60 per cent this year.

"Oil markets received a lift from the US stimulus chatter, but for the most part activity remains rudderless, awash in a sea of oil," Stephen Innes, market strategist at AxiTrader, said. The US Senate on Wednesday overwhelmingly backed a $2 trillion bill aimed at helping unemployed workers and industries hurt by the coronavirus epidemic.

But with demand disappearing and output rising, the outlook is bleak. Goldman Sachs forecast global oil demand, which stood at around 100 million barrels per day (bpd) last year, will fall by 10.5 million bpd in March and 18.7 million bpd in April. For the year, oil consumption is expected to contract by around 4.25 million bpd, the Wall Street bank said.

"Global isolation measures are leading to an unprecedented collapse in oil demand," it said.

The weakening demand will lead oil refineries to cut processing rates and drive a rise in inventories, which in turn will increase pressure on crude prices that Goldman expects will remain near $20 a barrel in the second quarter.

At the same time, the collapse of a supply-cut pact between the Organization of the Petroleum Exporting Countries and other producers led by Russia, known as OPEC+, is set to boost oil supply, with Saudi Arabia planning to ship more than 10 million bpd from May.