Oil drops nearly 2%, wiping out an earlier gain of more than 11%


Oil prices turned negative in afternoon trading on Thursday as optimism that previously supported prices began to subside. Earlier, oil rose due to several bullish factors, including reduced output by US companies, Saudi Arabia increasing its official selling price for oil and demand for gasoline improving with the reopening of economies around the world.

But oil could not keep its first gains and finally settled in the red. West Texas Intermediate, the US benchmark, lost 44 cents, or 1.83%, to $ 23.55 a barrel. Earlier in the session, the WTI had increased by more than 11%, peaking at $ 26.74. Crude oil Brent, the international benchmark, fell 26 cents to $ 29.46 a barrel.

However, for the week, the WTI is up 19%.

“Emerging signs of a rebound in gasoline demand in the United States and a rapid reduction in oil production that saw American producers cut more than 1 million barrels per day of production in a few weeks have allowed prices to oil to recover, “said CNBC John Kilduff of Capital again. . “Volatility will remain the watchword, but there is a growing feeling that the worst is behind the industry at this point. “

A drilling team secures a drill rod holder in the mouse hole on a drilling platform near Midland, Texas, February 12, 2019.

Nick Oxford | Reuters

Energy Information Administration data on Wednesday showed that for the week ending May 1, production fell 200,000 barrels per day to 11.9 million bpd, or more than 1 million bpd. d below the record level in March. Exxon, Chevron and ConocoPhillips are among the companies that have reduced production in the face of falling prices.

“There has just been a fierce reaction from American oil and exploration and production companies to really crater American production. It’s still very high, but it’s progressing fast, “added Kilduff.

As inventory in the United States continues to increase, it is now at a slower pace. Last week, stocks rose 4.6 million barrels, which was lower than the 8.67 million barrels expected by analysts, according to FactSet. And while gasoline demand is still far below peaks, government data has shown that it is starting to turn as states open up their economies.

Mizuho energy analyst Paul Sankey noted that oil also received a boost after Saudi Arabia raised its official selling prices, which “eases the pressure on world crude prices “

“They are still fighting for market share (mainly against Iraq / Iran) in Asia, but have completely but completely given up competition from American market shares,” he wrote in a note to customers Thursday.

Exaggerated rally?

Given the nearly 40% gain in WTI this month, some say the rally is overkill, especially as storage around the world continues to fill up.

“A change in market sentiment was driving prices up earlier this week, but the physical overhang is not going to go away yet,” Citi analyst Francesco Martoccia said on Wednesday. “The supply picture remains uncertain in terms of size and timing, which leaves an accurate reading of short-term US sales,” he noted.

“We are not out of the woods yet,” added Kilduff. “There may still be a flirtation with negative prices when this June contract disappears in a few weeks, but beyond that we should be aloof from these kinds of concerns. “

– Michael Bloom and Patti Domm from CNBC contributed to the report.


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