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Bloomberg
Oil was anchored near $20 a barrel as concerns over virus-led demand destruction outweighed an agreement by the world’s biggest producers to curb supply.
US producer ConocoPhillips said it will cut output by 225,000 barrels a day in response to lower prices in Canada and the US Inventories from America to Europe and Singapore have all ballooned this week, sending some localised crude prices below $10 a barrel. The glut is looking so severe that the Trump administration is considering paying American companies to leave crude in the ground.
The stockbuilds come as the Internatonal Energy Agency said 2020 may be the worst year in the history of the oil market as lockdowns globally lead to the biggest hit to demand ever. All the while physical oil prices, particularly in Europe, are trading far below those of futures.
As real crude prices and futures markets dislocate, some investors are eyeing a bottom in WTI, with almost $700 million flowing into a key ETF so far this week.
“What will be the most important determinant for oil markets in the short term is how quickly governments relax social distancing measures,†boosting consumption, said Rystad Energy AS’s head of analysis Bjornar Tonhaugen.
The physical oil market is also showing signs of strain. Key North Sea crude swaps are trading at the biggest discount to the headline Brent futures price in almost a decade. The critically important Dated Brent benchmark, which shapes the price of millions of barrels, was assessed by S&P Global Platts at $18.08 on Wednesday, with cargoes across Europe trading at a discount to that value.
Indian refiner Bharat Petroleum Corp. is seeking to cut its crude oil imports from Saudi Arabia by half in May as the world’s biggest lockdown hurts demand for fuel in the country. It follows a plunge in consumption in the US last week that saw gasoline demand at barely 5 million barrels a day.
“Our tanks are almost full, and we also have some cargo already in transit,†Ramamoorthy Ramachandran, director of refineries at BPCL said.