Oil slides back below US$16 on glut while producers start cuts
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Oil storage tanks are seen from above in Carson, California, on April 25, 2020.
PHOTO: AFP
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SINGAPORE (BLOOMBERG) - Oil slumped back below US$16 a barrel on Monday (April 27) as swelling global crude stockpiles made it more difficult for leading producers to balance the market by curbing output.
Futures lost as much as 10 per cent in New York, snapping a four-day gain. Drilling in onshore American fields dropped the most in 14 years last week after New York futures plunged below zero for the first time in history. Saudi Arabia has started reducing production ahead of the May 1 start date for OPEC+ supply cuts, joining Kuwait, Algeria and Nigeria in kicking off curbs early.
There were tentative signs at the weekend that the coronavirus outbreak might be loosening its grip, with the death tolls slowing by the most in more than a month in Spain, Italy and France, while reported fatalities reported in the UK and New York were the lowest since the end of March.
The swelling glut is testing global storage limits and forcing traders, refiners and infrastructure providers to seek novel ways to hoard crude, including on tiny barges around Europe's petroleum-trading hub and in pipelines. The hub of Cushing, Oklahoma, the delivery point for West Texas Intermediate futures, is filling fast and putting added pressure on the US crude benchmark.
"Concerns surrounding rising global inventories, especially in the US with the coronavirus pandemic weighing on gasoline consumption, are pressuring oil prices," Kim Kwangrae, commodities analyst at Samsung Futures Inc., said by phone from Seoul. "While Opec has started to curb output, demand is still not being supported and that's going to be a down factor for prices."
WTI for June delivery fell US$1.33 or 7.9 per cent, to US$15.61 a barrel on the New York Mercantile Exchange as of 9:43am Singapore time. The contract rose 2.7 per cent on Friday, trimming the weekly decline to 32 per cent. Brent for June settlement lost 34 cents to US$21.10 after falling 24 per cent last week.
US drillers idled 60 rigs last week, shrinking the active nationwide fleet to 378, according to data from Baker Hughes on Friday. On a percentage basis, the decline was the worst since February 2006. It was the sixth straight weekly drop, halting almost half of American exploration.
Saudi Aramco last week began curtailing daily output from about 12 million barrels to 8.5 million barrels a day, according to a Saudi industry official familiar with the matter. Opec+ has agreed to reduce production by about 9.7 million barrels a day in an effort to stem oil-price losses.
