Oil prices rose by over 2 per cent on Tuesday after China announced it will introduce a $586 billion stimulus package to help stabilize its slowing economy.  Apache photo.

Oil prices reverse Monday’s losses

Oil prices gained over 2 per cent on Tuesday after the Chinese government announced it would introduce a $586 billion stimulus package to boost its slowing economy.

By 3 p.m., EST, benchmark Brent crude had risen $1.37 to $63.06/barrel and US West Texas Intermediate climbed $1.35 to $51.86/barrel.  At one point on Tuesday, US WTI hit $52.18/barrel.

“Some of the fears about the economic slowdown in 2019 seem to have ebbed away,” Gene McGillian, director of market research at Tradition Energy told Reuters. “The market is latching on to news that suggests that the economy may be better than thought.”

On top of the massive stimulus announced by the Chinese government on Sunday, China’s National Development and Reform Commission signalled it may roll out even more fiscal stimulus.  This boosted oil prices on Tuesday after Monday’s losses of over 2 per cent on data showing weakening imports and exports in China.

Also buoying oil prices is the OPEC supply cut agreement which will see participants cut their total production by 1.2 million barrels per day for the first six months of 2019.  The cartel along with other oil producers, including Russia, agreed the plan to rein in global oversupply late last year.

The group will meet on March 17 and 18 to monitor the implementation of the agreement, according to Reuters sources.  They will also meet on April 17 and 18 to discuss a possible extension of the cuts for another six months.

Along with the OPEC cuts, the number of drilling rigs in the United States fell last week to 873.  As well, participants in a Reuters survey expect US Energy Information Administration data scheduled to be released on Wednesday will show US crude inventories fell last week.

On Saturday, the US Special Representative for Iran, Brian Hook, announced that Washington is not looking to grant any more waivers to Iran’s oil-buying customers.  This would likely result in less Iranian crude hitting the market.

Last November, the Trump administration granted waivers to a number of Iran’s largest customers.  The Trump administration announced sanctions on Iranian crude exports in May 2018, after Washington walked away from the Iran nuclear deal.

World stock markets and oil prices have been bolstered recently on trade talks between the United States and China continue.  Despite the progress, fears about slowing global growth continue to weigh heavily on the market.

“It would seem that the market is having a rather hard time making up its mind as to which story to believe in,” consultancy JBC Energy said.