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LONDON: Oil fell to around $ 26 a barrel on Friday due to weak demand due to the coronavirus crisis and oversupply pressured the market, even as OPEC and its allies began a record cut in production.
The world benchmark oil index, Brent crude, collapsed 60 percent in 2020 and hit a 21-year low last month when the coronavirus pandemic slashed demand and OPEC and other producers pumped at will before it arrived. to a new supply cut agreement that started on Friday.
Brent for July fell 46 cents, or 1.7%, to $ 26.02 at 0825 GMT. US crude for June fell 2 cents to $ 18.82. Both benchmarks rose sharply on Thursday. Brent rose 12% and US crude oil gained 25%.
Production cuts of 9.7 million barrels per day by the Organization of the Petroleum Exporting Countries, Russia and other producers began on Friday. Reflecting that effort, the imbalance between supply and demand will be halved in May, according to Rystad Energy.
“While this may seem like a drastic improvement since April, the oil market is not magically fixed,” said Rystad analyst Louise Dickson. “The storage problem is still a big one,” he said, referring to oil tanks around the world that are filling up quickly.
Demand is likely to underperform, analysts at JBC Energy said, offsetting producers’ efforts to address oversupply.
“Crude demand is likely to disappoint even if the more optimistic demand recovery forecasts for end user consumption materialize, due to high inventory pressure that has built up over the past month,” JBC said.
A Reuters poll on Thursday showed that, before the new production cut, OPEC drastically raised production to its highest level since March 2019, adding to oversupply in the market.
And underscoring the difficulties some producers will face in meeting their commitments, Iraq will have a hard time meeting its quota of cutting production by almost a quarter, industry sources said. Iraq is OPEC’s second largest producer.
Also supporting prices, the US Energy Information Administration. USA He said crude inventories rose 9 million barrels last week, less than analysts had predicted of 10.6 million barrels.
“This is a second week in a row of inventory and product demand figures suggesting a bottom of the US market,” said Stephen Innes, chief market strategist at AxiCorp. – Reuters
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