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U.S. oil prices slide toward 18-year low after IEA warns of a record annual drop in demand due to pandemic

U.S. oil prices slide toward 18-year low after IEA warns of a record annual drop in demand due to pandemic

EIA reports biggest weekly U.S. crude supply climb on record

A grim forecast for a record drop in oil demand this year and a 12th consecutive weekly climb in U.S. crude stockpiles sets U.S. benchmark prices up for their lowest finish in 18 years on Wednesday.
The International Energy Agency warned of a record drop in crude demand this year due to the COVID-19 pandemic, which has forced countries around the world to close their economies.
The recent production-cut deal between members of the Organization of the Petroleum Exporting Countries and its allies has failed to boost prices for oil, disappointing the market as it “failed to address the immediate structural oversupply, leaving prices vulnerable,” said Stephen Innes, chief global markets strategist at AxiCorp, in a market report. “Markets believe the deal won’t come close to offsetting demand devastation and isn’t even large enough to eat into what’s in storage.”
Added to all of that, U.S. government data showed Wednesday that domestic crude inventories posted their largest weekly climb on record, according to ClipperData, up a 12th straight week.

Weekly changes in EIA U.S. crude supply in thousand barrels per day

 ClipperData based on EIA figures
Refining runs plunged to a 12-year low, down nearly a million barrels per day from last week, while “gasoline inventories reached uncharted territory and oil inventories see their biggest weekly jump in history,” said Matt Smith, director of commodity research at ClipperData.
“Oil inventories are now above 500 million barrels for the first time since January 2017,” he told MarketWatch.
West Texas Intermediate crude for May delivery CL.1, -2.78% fell 62 cents, or 3.1%, to $19.49 a barrel, after dropping more than 10% Tuesday to a two-week low on the New York Mercantile Exchange. Front-month contract prices were on track for the lowest finish since January 2002, according to Dow Jones Market Data.
June Brent crude BRNM20, -6.86% slid $2.33, or 7.9%, to $27.27 a barrel after a 6.7% fall Monday on ICE Futures Europe. Prices were poised for the lowest settlement since April 1.
The Paris-based IEA estimated a drop in demand of 9.3 million barrels a day this year, equivalent to a decade’s worth of growth. In the near term, demand in what the agency is referring to as “Black April” for the energy market, is forecast to drop to its lowest since 1995.
Investors have all but brushed aside a deal by OPEC and allied oil producers, collectively known as OPEC+, Sunday to cut overall crude-oil production by 9.7 million barrels a day starting on May 1 through June 30 of this year.
“OPEC has a deal, but you’d never know it from the price,” said Innes.
Meanwhile, the Energy Information Administration reported on Wednesday a rise of 19.2 million barrels in domestic crude supplies for the week ended April 10. Analysts polled by S&P Global Platts expected the data to show a rise of 10.1 million barrels. The American Petroleum Institute on Tuesday reported a climb of 13.1 million barrels, according to sources.
Gasoline supply rose 4.9 million barrels and distillate stockpiles added 6.3 million barrels, the EIA said. The S&P Global Platts survey had shown expectations for a supply rise of 7.1 million barrels for gasoline, and distillate stockpiles were expected to climb by 1.8 million barrels.
“Hard to find anything bullish in this report, with large inventory builds across the board [and] product stocks rise strongly despite slashed runs,” said Smith.
On Nymex, May gasoline RBK20, 0.13% fell by 0.9% to 71.32 cents a gallon, while May heating oil HOK20, -3.59% lost 4.8% to 89.88 cents a gallon.
Ahead of the EIA’s weekly data on U.S. natural gas supplies, May natural gas NGK20, -1.64% fell 2.8% to $1.604 per million British thermal units. 
Still, data from the EIA did show that total U.S. crude production edged down by 100,000 barrels a day to 12.3 million barrels.
“Whether today’s slump in oil prices serves to rally OPEC+ into another cut remains to be seen,” said Joshua Mahony, senior market analyst at IG, in a note to clients ahead of the U.S. supply data. “However, with the group having difficulty achieving the 9.7 [million barrel per day] cut, an inability to enact further restrictions would likely lead to further downside for the months ahead.”

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