TOKYO (Business) – Oil prices fell on Wednesday on persistent worries about oversupply amid global coronavirus-related lockdowns and as the International Monetary Fund (IMF) warned of a deep recession.
Brent futures were down 51 cents, or 1.7%, at $29.09 a barrel as of 0735 GMT, giving up earlier gains and extending losses from Tuesday’s 6.7% decline.
U.S. West Texas Intermediate crude slid 4 cents, or 0.2%, to $20.07, having crashed 10.3% in the previous session.
Both benchmarks were stronger earlier in the session, as investors looked for bargains following the slumps on Tuesday, but the higher U.S. crude oil stocks fuelled concerns that a record global output cut by producers would not offset plunging fuel demand due to efforts to contain the coronavirus pandemic.
U.S. crude inventories rose by 13.1 million barrels in the week ended on April 10, data from industry group the American Petroleum Institute showed on Tuesday, more than analyst expectations for a build of 11.7 million barrels.
Warnings from the IMF of what could be the steepest global downturn since the Great Depression of the 1930s also dampened investors sentiment.
The global economy is expected to shrink by 3% during 2020 in a stunning coronavirus-driven collapse of activity, the IMF said on Tuesday.
Hopes for massive purchasing by consuming countries for their strategic stockpiles, however, had lent support earlier in the session.
Officials and sources from the Organization of the Petroleum Exporting Countries and its Russia-led allies – a grouping known as OPEC+ – have indicated that the International Energy Agency (IEA), energy watchdog for the world’s most industrialised nations, may announce purchases of up to several million barrels to buoy the record OPEC+ output cut.
The U.S. Energy Department said on Tuesday it is negotiating with nine energy companies to store about 23 million barrels of domestic oil in its Strategic Petroleum Reserve (SPR).
“Expectations that non-OPEC+ members such as the United States and Canada will also trim output helped improve the market’s tone in early trade,” said Satoru Yoshida, a commodity analyst with Rakuten Securities.
U.S. shale oil output is expected to drop by 194,000 barrels per day (bpd) in April, the most on record, according to the U.S. Energy Information Administration.
(Photos syndicated via Reuters)
