By Adedapo Adesanya
Oil prices reacted negatively on Wednesday to the first decline in the United States crude inventories since January as the coronavirus pandemic proved to weigh more on the market than all measures put in place so far.
The international benchmark, Brent crude futures, fell 66 cents or 2.2 percent to settle at $29.32 per barrel, while the US West Texas Intermediate (WTI) crude futures dropped 28 cents or 1.09 percent to settle at $25.50 per barrel.
US crude stockpiles fell by 745,000 barrels, the Energy Information Administration (EIA) said, compared with analysts’ expectations for a 4.1 million-barrel rise, the first time in four months.
The EIA data also showed crude stocks at the Cushing, Okla. storage hub declined by 3 million barrels last week to 62.4 million barrels. Working storage capacity at Cushing stands at around 76 million barrels.
A fresh concerns about a possible second wave of coronavirus cases in countries easing lockdowns signalled that there could be a renewed movement restrictions.
New outbreaks have been reported in South Korea and in China, where the health crisis started before spreading around the world, prompting governments to lock down billions of people, devastating economies and demand for oil.
The northeastern Chinese city of Jilin imposed travel restrictions on Wednesday, closed off residential areas and banned gatherings after several coronavirus cases were confirmed there.
The concerns overshadowed a further call by Saudi Arabia for larger production cuts to balance the market, following a virus-induced demand slump, after the de-facto OPEC leader alongside the United Arab Emirates and Kuwait announced cut extra oil supply of up to 1.18 million barrels.
Under this, the additional voluntary reduction would bring Saudi’s production to 7.5 million barrel per day next month.
Despite this, the problem of oversupply and storage problems still remain at the oil market.
The Organization of the Petroleum Exporting Countries also slashed its world oil demand forecast, now expecting it to contract by 9.07 million barrels per day this year, it said in a monthly report. Last month, OPEC expected a contraction of 6.85 million barrels per day.
OPEC and other producers including Russia, a group known as OPEC+, are looking to maintain existing cuts beyond June, when it meets next in Vienna.
OPEC+ agreed to cut output by 9.7 million barrels per day in May and June and to scale back cuts to 7.7 million barrels per day for the rest of the year.
Dipo Olowookere