By Adedapo Adesanya
Crude oil failed to make a six-day growth at the market on Wednesday, May 6, slipping for the first time in almost a week.
This happened in the face of a renewed oil glut problem, which shoved recovering demand to the sidelines after pushing the market up in the past five days.
The Brent crude, which crossed the $30 levels on Tuesday, returned to $29.74 per barrel after shedding 4 percent or $1.21, while the US West Texas Intermediate (WTI) crude fell by 2.3 percent or 57 cents to sell at $24.00 per barrel.
The gradual easing of the lockdown measures that contributed to the previous gains have so far proven to be short-term as demand factor is far too large to be offset by a temporary measure.
An improving demand outlook spurred recent optimism, with prices also supported by producers announcing scale backs in operations.
The historic cut from the Organisation of the Petroleum Exporting Countries (OPEC) and its oil-producing allies, which shaves 9.7 million barrels per day offline, went into effect on May 1. But this did not matter yesterday because of the major problem, the coronavirus pandemic.
Even data from the US Energy Information Administration (EIA) released on Wednesday showed that for the week ending May 1, inventories rose by 4.6 million barrels, which was smaller than the 8.67 million barrels build.
In a different scenario, this would have spurred the market to grow but the COVID-19 impact on the market far outweighs normally bullish trends because even with the slow rise in inventories, storage facilities – another problem facing the market – will still fill up, although at a slower pace.
Major oil companies like Exxon and Chevron have cut production in the face of depressed prices but analysts note that as storage continues to fill, the announced cuts are still not enough.
Crude prices over the past several sessions have been supported by hopes for an increase in demand, along with some signs of a slowdown in production, supply remains burdensome and storage facilities are close to full and this will continue to hold the market, experts cautioned.
Another addition to the surplus supply worries was the OPEC production, which climbed in April, with the group producing 30.8 million barrels per day, the most since February 2019, according to a survey Wednesday from S&P Global Platts.
Output was up 1.82 million barrels per day from March due to the failure to cut production and the aftermath of oil price war which eventually followed.
