An aerial seascape of oil tankers anchored near the ports of Long Beach and Los Angeles amid the coronavirus pandemic on April 28, 2020 off the coast of Big Beach, California.
Mario Tama | Getty Images
Oil prices were lifted on Thursday by an unexpected drop in U.S. brusque stocks, but gains were capped by both a bleak outlook for the world’s no. 1 economy as the coronavirus pandemic crushes encouragement demand and concern over a potential second wave of cases.
Brent crude futures were up 6 cents, or 0.2%, at $29.25 per barrel at 0401 GMT. U.S. West Texas Midway (WTI) crude futures were up 18 cents, or 0.7%, to $25.47 a barrel.
Prices have risen in the past two weeks as some territories relaxed coronavirus restrictions and lockdowns to allow factories and shops to open again. But new cases have emerged in South Korea and China, put together concerns over a possible second wave of infections which would weigh on economic recovery and fuel insist on.
U.S. Federal Reserve Chairman Jerome Powell warned on Wednesday of an “extended period” of weak economic growth and invited for additional fiscal spending to stave off the fallout from the virus.
“It is hard to get excited about a steady rebound for inconsiderate demand when the world’s largest economy has significant uncertainty about the outlook and big downside risks,” said Edward Moya, superior market analyst at OANDA.
A drop in U.S. crude inventories provided some support to prices early in the trading sitting, but Moya said much bigger drawdowns over the next few weeks would be needed to boost prices.
U.S. coarse inventories fell by 745,000 barrels to 531.5 million barrels in the week to May 8, marking the first decline since January, the Dash Information Administration said on Wednesday. Analysts in a Reuters poll had forecast a 4.1 million barrel increase.
In the slump in fuel use, the Organization of Petroleum Exporting Countries (OPEC) said on Wednesday it expects 2020 global oil marketability to shrink by 9.07 million bpd, worse than its previous contraction forecast of 6.85 million bpd. It said it also anticipated the second quarter to see the steepest decline in demand.
ING Economics said in a note the lowering of demand forecasts made for “relation reading”.
“(Second-quarter) demand for OPEC oil is just 16.77 million bpd, well below OPEC output levels, indeed when full compliance of OPEC+ cuts are taken into consideration,” ING added.
OPEC+, a grouping of OPEC and other financial managers including Russia, agreed in April to curtail production by 9.7 million barrels per day (bpd) in May and June. Saudi Arabia, de facto Mr Big of OPEC, also said it would cut its own output by an additional 1 million bpd to 7.5 million bpd starting in June.