By Barani Krishnan
Investing.com - Oil prices settled little changed on Wednesday, with U.S. crude appearing to have lost the $20-per-barrel support, from a sea of unwanted crude that sellers said was getting pricier and more difficult to store.
OPEC, which agreed at the weekend to cut almost 10 million barrels per day with other global producers, forecast further pain and weak crude demand from the coronavirus pandemic in its latest report. It was an outlook that stated the obvious.
“At the current pace of stock building, the U.S. would have about two weeks before reaching recent record stocks in crude oil and gasoline,” Olivier Jakob, founder of Swiss oil risk consultancy PetroMatrix, said. “Distillate has more room to go, and gasoline might have to fight for some of that tank space.”
West Texas Intermediate, the New York-traded benchmark for U.S. crude, settled unchanged at $19.78 per barrel.
WTI hit 18-year lows of $19.21 on Wednesday after the Washington-based Energy Information Administration reported a record jump of 19.3 million barrels in crude stockpiles for last week. The build was 65% above forecast and brought inventory gains in U.S. crude to nearly 50 million over the past three weeks.
U.S. gasoline stocks reported by the EIA, however, came in 25% less than forecast. That helped gasoline futures climb and limited WTI’s drop in the previous session as the “crack”, or refining value, for the fuel rose.
Brent, the London-traded global benchmark for crude, rose 13 cents, or 0.5%, at $27.82 per barrel. Brent slumped 4.7% in the previous session.
With pressure building on storage — amid talk of “subzero prices” where producers were practically giving away their oil for free to store it — the discount in spot Brent and WTI versus long-dated contracts was getting out of hand, analysts said.
Brent for June 2021 delivery was at $39.18, a premium of more than $11.80 to the spot contract. In WTI, the front-month May contract was trading nearly $15.65 lower to May 2021.
“This is a whole new world, one of negative interest rates and energy prices, with the situation continuing to develop,” Investing.com analyst Pinchas Cohen said.
“Before Covid-19, OPEC+ dominated the headlines and the cartel was able to flex their oil-price muscles. Now, they're sparring with the World Health Organization, U.S. President Donald Trump and the coronavirus curve in various countries for daily news dominance — all of which also potentially moves the price of crude, one way or another.”
OPEC said global oil demand was slated to drop by 6.8 million barrels per day this year. The group also said April demand alone would drop to 20 million barrels per day in April, about one-fifth of previous demand.
A day earlier, the Paris-based International Energy Agency projected crude demand in April will fall by 29 million barrels a day, equating roughly to 29% of the world’s 100-million-barrel daily oil-demand.
"The oil market is currently undergoing historic shock that is abrupt, extreme and at global scale," OPEC wrote in the report.
Igor Windisch of the IBW Daily Oil Brief agreed.
“I don’t see any news that can turn the market’s downward trend,” he wrote. “As simple as that.”