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Oil little changed as falling demand offsets hopes of US aid package

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Oil prices rose modestly on Tuesday, but settled off the day's highs as the coronavirus pandemic's heavy toll on demand offset hopes for a forthcoming US$2 trillion US economic relief package.

[NEW YORK] Oil prices rose modestly on Tuesday, but settled off the day's highs as the coronavirus pandemic's heavy toll on demand offset hopes for a forthcoming US$2 trillion US economic relief package.

India, the world's third largest oil consumer, ordered its 1.3 billion residents to stay home for three weeks as of Tuesday, the latest big fuel user to announce restrictions on social movement that have destroyed demand for petrol and jet fuel worldwide.

The oil market has been hit by twin shocks. The unexpected price war between Saudi Arabia and Russia has unleashed a flood of supply while the pandemic is on track to cut fuel demand by at least 10 per cent worldwide.

Brent futures rose 12 cents, or 0.4 per cent, to settle at US$27.15 a barrel. US West Texas Intermediate (WTI) crude gained 65 cents, or 2.8 per cent, to settle at US$24.01.

"No one has a handle of how much the world will come to a halt," said Edward Moya, senior market analyst at Oanda in New York. "It will probably be impossible for oil prices to continue to stabilise."

Early in the session both Brent and WTI were trading up over 5 per cent. US petrol futures, meanwhile, soared over 30 per cent early day and closed up about 8 per cent.

The Fed on Monday rolled out programmes including backing for corporate bond purchases for the first time. Senior Democrats and Republicans said on Tuesday they were close to a deal on a US$2 trillion coronavirus economic stimulus package.

The price of oil has halved in 2020, hit by the demand shock caused by the pandemic and efforts to contain it, and removal of supply limits by the Organization of the Petroleum Exporting Countries and other producers, including Russia, when a deal by the so-called Opec+ fell apart in early March.

Saudi Arabia plans to boost exports, although they have yet to increase in March, sources at companies that track oil flows said on Monday.

"The extreme imbalance between supply and demand due to the travel restrictions has only just began to unfold in the physical markets, and the true impact will be felt in the coming weeks," said Rystad Energy's head of oil markets, Bjornar Tonhaugen, in a note.

The latest round of weekly US oil reports are expected to show crude inventories rose for a ninth straight week.

Industry group the American Petroleum Institute (API) was scheduled to release its supply report on Tuesday at 4.30 EDT (2030 GMT), followed by the US government's figures on Wednesday.

REUTERS