Oil prices jumped by 4 percent early on Tuesday after the U.S. Federal Reserve launched on Monday extensive new measures to support the economy as the coronavirus pandemic spreads.
But prices slid later in the morning.
At 9:34 a.m. EDT on Tuesday, WTI Crude was up 3.98 percent on the day at $24.41, and Brent Crude was trading above the $30 a barrel mark, at $30.47, up by 3.86 percent.
By 11:11 a.m, WTI had fallen to $23.32, down 0.17% over Monday.
On Monday, the Federal Reserve on Monday said it was “committed to using its full range of tools to support households, businesses, and the U.S. economy overall in this challenging time.”
The Fed is establishing facilities to support credit to companies, including by buying on the secondary market a) corporate bonds issued by investment-grade U.S. companies, and b) facilities to ease the flow of credit to consumers, businesses, and municipalities.
The Fed's 'unlimited' bond buying plan has caused markets to rally, but analysts remain cautious as several other attempts to prop up the market have not resulted in a sustainable recovery.
“The oil market found some support yesterday and this has continued this morning, following the US Fed taking further action to cushion the economic fallout from the Covid-19 virus,” ING strategists Warren Patterson and Wenyu Yao said on Tuesday.
Oil prices received some additional support thanks to growing speculation that the U.S. and Saudi Arabia are talking about some form of cooperation to support oil prices.
A U.S.-Saudi coalition is one of the ideas floating around, U.S. Energy Secretary Dan Brouillette told Bloomberg Television in an interview on Monday, after reports started suggesting that an alliance may be in the works. Related: API Asks Trump For Help
Last week, U.S. President Donald Trump said that “at the appropriate time, I’ll get involved” in the Saudi Arabia-Russia oil price war.
Texas Railroad Commissioner Ryan Sitton spoke with OPEC’s Secretary General Mohammad Barkindo on Friday and tweeted that “we all agree an international deal must get done to ensure economic stability as we recover from COVID-19. He was kind enough to invite me to the next OPEC meeting in June.”
“Meanwhile growing noise around a potential US-Saudi oil alliance has only provided further support to the market. For now, though, an alliance between the two does seem like a pipe-dream,” ING strategists said.
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Other analysts, including Eugen Weinberg at Commerzbank, told Reuters on Tuesday that “It is highly questionable whether the good mood will continue on the oil market,” given the double supply and demand shock.
By Tsvetana Paraskova for Oilprice.com
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I suspect that won't last too much longer.