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U.S. crude prices settled higher on Wednesday, bolstered by progress on a massive pending U.S. economic stimulus package, even as government data showed the coronavirus pandemic started undercutting U.S. fuel demand last week.

Demand for oil products, especially jet fuel, is falling dramatically as governments globally announce nationwide lockdowns to slow the spread of coronavirus.

Fuel demand is expected to fall sharply worldwide in the second quarter with aviation largely at a halt and road travel severely curtailed. Most recently, India, the world’s second most populous country and the third-largest oil consumer, entered a 21-day lockdown.

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U.S. weekly gasoline product supplied – a proxy for demand – dropped 859,000 barrels per day (bpd) to 8.8 million bpd last week, the biggest one-week decline since September 2019, according to the U.S. Energy Information Administration. Overall fuel demand fell by nearly 2.1 million bpd for the week.

West Texas Intermediate (WTI) crude futures rose 48.00 cents to settle at $24.49 a barrel, a 2 per cent gain. Brent crude rose 24 cents, or 0.9 per cent to settle at $27.39 a barrel.

U.S. senators and Trump administration officials have reached agreement on a $2 trillion stimulus bill that Congress was expected to pass on Wednesday, helping to boost markets.

The chief executive of the world’s biggest oil trader, Vitol Group, estimated a demand loss of 15 million to 20 million barrels per day (bpd) over the next few weeks.

The U.S. energy sector is slashing capital spending and jobs, with capital expenditures at most shale companies expected to drop by at least 30 per cent.

The outlook has turned “extremely pessimistic” amid the coronavirus pandemic, a survey by the Dallas Federal Reserve Bank of oil and gas companies showed on Wednesday. The Dallas Fed said its business activity index plunged from -4.2 in the fourth quarter to -50.9 in the first, the lowest reading in the survey’s four-year history.

“We are entering into the single worst reset in energy prices in my lifetime,” said one respondent. Another said they were in “survival mode now.”

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Crude inventories rose by 1.6 million barrels in the most recent week, the EIA said. Inventories, which have risen for nine straight weeks, are expected to keep growing as fuel demand declines and refineries pare back activity.

Oil prices have fallen by more than 45 per cent this month after OPEC+, comprising the Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russia, failed to agree on extending output cuts.

“This reminds me of the aftermath of the 1998 price crash and what it did to our productive capacity for the next decade,” said John Kilduff, a partner at Again Capital Management in New York.

“These busts like this can be long lasting in the oil industry.”

Prices to roll U.S. crude oil futures positions from April to May sank to minus $6.75 a barrel on Wednesday, the weakest since December 2008, signalling the expectation of sharp crude oil oversupply in coming months, traders said.

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