In April, American crude oil fell to its lowest level ever and traded negatively for the first time while Brent crude nearly 21 years as the pandemic eroded demand and OPEC and other producers increased their production before reaching the new supply agreement. which started on Friday.
Brent futures for July fell 4 cents, or 0.2%, to $ 26.44 a barrel. The June contract expired Thursday at $ 25.27.
US crude West Texas Intermediate (WTI) ended the session at 94 cents, or 5% higher, at $ 19.78 after surpassing $ 20 earlier in the session.
After three consecutive weeks of losses, Brent crude gained approximately 23% while WTI rose approximately 17%.
WTI also found support after U.S. energy companies shut down oil rigs for the seventh consecutive week, bringing the total to 325, the lowest since June 2016, energy service company Baker Hughes Co (BKR.N) said.
The Organization of the Petroleum Exporting Countries, Russia and other producers, known as OPEC +, have agreed to cut production by 9.7 million barrels per day starting May 1.
Several countries and regions, including the central province of Hubei, in China, where the new coronavirus causing the pandemic was detected for the first time, are easing the locking measures put in place to contain the virus.
“World oil stocks probably peaked in April, with demand for oil contracting by almost 25 million barrels a year,” according to a report by BofA Global Research.
“Now the countries are coming out of the closures, stimulating demand just as the OPEC + cuts take effect and producers elsewhere are cutting production. “
Despite this, the reduction in production, the largest ever agreed, is doubtful, as demand is unlikely to recover quickly.
“The production reductions are finally taking effect,” said Craig Erlam, OANDA brokerage analyst. “Prices are still extremely low and the next two weeks are likely to see a return to extreme volatility. “
A Reuters survey on Thursday showed that before the further production cut, OPEC sharply increased production to the highest since March 2019, adding to excess supply already on the market.
“Resuming demand will be a muted affair,” said Stephen Brennock, of oil broker PVM. “In addition, the OPEC + restrictions that take effect today will not be a panacea for the significant supply imbalance.”
FILE PHOTO: The sun is seen behind a crude oil pump cylinder in the Permian Basin in Loving County, Texas, United States, on November 22, 2019. Photo taken on November 22, 2019. REUTERS / Angus Mordant
Highlighting the difficulties some producers will face in meeting their commitments, industry sources said that Iraq would be hard pressed to meet its nearly one-quarter production reduction quota. Iraq is the second largest producer of OPEC.
Also supporting oil prices, the U.S. Energy Information Administration said on Wednesday that crude inventories rose 9 million barrels last week, less than the 10.6 million barrel increase forecast by analysts.
“This is the second consecutive week of inventory and product demand numbers suggesting a trough in the US market,” said Stephen Innes, chief market strategist at AxiCorp.
Additional reporting by Alex Lawler, Aaron Sheldrick; Editing by Marguerita Choy and David Clarke
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