A recent agreement by the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, was “encouraging, but reports on demand from agencies like the IEA suggest it’s not enough...to offset the drop in demand,” said Colin Cieszynski, chief market strategist at SIA Wealth Management.
“At this point, it’s still uncertain how long demand will remain low and what an eventual recovery could look like,” he told MarketWatch. So “we appear to be moving into a lower sideways range for oil, say around $19.00 to $29.00, where it could be stuck for a while.”
U.S. benchmark WTI crude for May delivery CL.1,
Global benchmark June Brent crude BRNM20,
Oil prices slumped Wednesday after the International Energy Agency forecast a record drop of 9.3 million barrels a day in oil demand this year. In a report Thursday, OPEC slashed its expectations for crude demand and said it now sees 2020 demand falling by 6.8 million barrels a day.
The near-term demand picture remains front and center as well, with analysts looking for it to continue sliding at least through May.
“At the moment we expect the month of April to take the biggest hit, with demand for oil estimated at 72.5 million bpd (barrels per day), falling by 27.6 million bpd year on year, a 27.6% drop. Similarly, May’s demand is expected to fall by 19.5%, or 19.3 million bpd to 79.7 million bpd,” wrote analysts at Rystad Energy.
Meanwhile, efforts by leaders in Europe and the U.S. to begin reopening economies closed by the effort to contain the COVID-19 pandemic were credited with lifting global equities. President Donald Trump was discussing his administration’s pandemic response with world leaders U.S. governors and lawmakers Thursday as he prepares to announce guidelines for states to follow on reopening their economies. Germany will allow small shops to reopen beginning Monday.
“Negative economic news like rising unemployment, rising [crude] inventories,” with the trend more important than weekly changes, and “travel/transport restrictions and falling GDP may continue to weigh on oil,” said Cieszynski.
Still, “oil could get support from any signs of lockdowns easing or additional production cuts,” he said.
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The Energy Information Administration on Wednesday reported a 19.2 million-barrel weekly increase in U.S. crude supplies. That marked a 12th straight weekly rise and was the largest weekly climb on record.
With OPEC+ likely done cutting output for now, “the next place to watch would be the earnings reports for North American energy producers which start toward the end of next week,” he said. Exxon Mobil Corp. XOM,
The Railroad Commission of Texas, which regulates the oil-and-gas industry in the state, held a hearing Tuesday to discuss a potential cut of 20% in Texas oil output, or about 1 million barrels per day. It is expected to take up the matter again at a meeting on April 21.
Meanwhile, the Trump administration is weighing a plan that would pay shale producers to keep crude in the ground as part of the U.S. strategic reserve, Bloomberg reported late Wednesday, citing senior administration officials.
Back on Nymex, May gasoline RBK20,
May natural gas NGK20,
The U.S. Energy Information Administration reported Thursday that domestic supplies of natural gas rose by 73 billion cubic feet for the week ended April 10. That was generally in line with average expectations for an increase of 71 billion cubic feet, according to a survey of analysts conducted by S&P Global Platts.