Coronavirus update: Oil prices rally on hopes for US stimulus

International benchmark Brent crude was up 2.9 percent to trade at nearly $28 per barrel, while US benchmark West Texas Intermediate rose 3.5 percent to nearly $25 per barrel.

Oil prices rallied in Asia Wednesday on signs the US Congress was nearing an agreement on a massive stimulus package to help the coronavirus-ravaged American economy, tracking record Wall Street gains.

People line up at a primary school in Antananarivo to buy rice and oil at a low price offered by the local authorities, on March 23, 2020. (AFP file photo for representation)

International benchmark Brent crude was up 2.9 percent to trade at nearly $28 per barrel, while US benchmark West Texas Intermediate rose 3.5 percent to nearly $25 per barrel.

Both contracts have hit multi-year lows in recent weeks as lockdowns and travel restrictions to fight the virus hit demand, and with top producers Saudi Arabia and Russia engaged in a price war.

Wednesday’s gains came after the Dow surged 11.4 percent, its biggest one-day percentage increase since 1933, on indications Congress is nearing agreement on a rescue package for the US economy that could amount to more than $2 trillion.

Markets were also cheered by the G7’s promise to do “whatever is necessary”, and the Fed’s announcement Monday that it would inject unlimited money into the financial system and serve as the lender of last resort for troubled sectors.

But analysts warned the gains could be short-lived.

“The canary in the coal mine is chirping,” said AxiCorp chief markets strategist Stephen Innes, adding there was an “absence of demand amid rapidly rising physical inventories”.