Oil prices rally on hopes for US stimulus

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.

International benchmark Brent crude was up 2.9 per cent to trade at nearly USD 28 per barrel, while US benchmark West Texas Intermediate rose 3.5 per cent to nearly USD 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 per cent, 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 USD 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".