NEW YORK (Reuters) – Oil prices sank on Wednesday after the United States reported its biggest weekly build of crude oil inventories on record, while forecasts showed global demand crumbling to its worst levels in a quarter of a century.
Brent crude LCOc1 was down $1.88, or 6.4%, to $27.72 a barrel by 10:46 a.m. EDT (1446 GMT). U.S. West Texas Intermediate crude CLc1 slid 24 cents, or 1.2%, to $19.87.
U.S. crude stocks rose by 19 million barrels in the most recent week, the biggest one-week increase in history, to 503.6 million barrels as refiners slashed activity due to lost demand as a result of the coronavirus pandemic, the U.S. Energy Information Administration said. [EIA/S]
“Even though we knew it was going to be bad, it’s worse than people thought,” said Phil Flynn, an analyst at Price Futures Group in Chicago. “We’re seeing the worst of demand destruction we’ve ever seen in our lifetime.”
The International Energy Agency (IEA) on Wednesday forecast an oil demand dive of 29 million barrels per day (bpd) in April to levels not seen in 25 years and said no output cut could fully offset the near-term falls facing the market. [IEA/M]
“There is no feasible agreement that could cut supply by enough to offset such near-term demand losses,” the IEA said in its monthly report. “However, the past week’s achievements are a solid start.”
Crude prices have tumbled this year, hitting an 18-year low of $21.65 a barrel on March 30. The drop in prices and demand has pushed global producers to agree to unprecedented supply cuts.
The Organization of the Petroleum Exporting Countries (OPEC), along with Russia and other producers – a grouping known as OPEC+ – has partnered with other oil-pumping nations, such as the United States, in the record global supply pact.
Officials and sources from OPEC+ states indicated the IEA, the energy watchdog for the world’s most industrialized nations, could announce purchases of oil for storage of up to several million barrels to buoy the deal.
But as of Wednesday, no such IEA purchases had materialized. The agency, in its report, said it was “still waiting for more details on some planned production cuts and proposals to use strategic storage.” [IEA/M]
The United States, India, China and South Korea have either offered or are considering such purchases, the IEA added.
Some analysts said they expect more downward pressure on the market without a demand recovery.
“The slow implementation of the agreement, the risk of non-compliance and no firm commitment from others to follow suit could see the market remain under pressure until the pandemic loosens its grip to let fuel demand recover,” Saxo Bank analyst Ole Hansen said.
Additional reporting by Alex Lawler Yuka Obayashi and Stephanie Kelly; Editing by Kirsten Donovan, Alexander Smith and Paul Simao