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Oil Anchored Near $24 While Investors Weigh Demand Against Glut

Oil was anchored near $24 a barrel after halting a five-day rally as investors weigh small signs of recovering demand against a huge glut that’s testing global storage capacity limits.
Bloomberg
By Bloomberg
7 May
Pumping Jacks As Oil Rally Falters In Escalating Price War An oil pumping jack, also known as "nodding donkey", stands in an oilfield near Almetyevsk, Tatarstan, Russia, on Wednesday, March 11, 2020. Saudi Aramco plans to boost its oil-output capacity for the first time in a decade as the world’s biggest exporter raises the stakes in a price and supply war with Russia and U.S. shale producers. Photographer: Andrey Rudakov/Bloomberg

Oil futures edged higher in New York after losing 2.3% on Wednesday. American gasoline consumption on a four-week basis rebounded at its strongest rate on record last week but remained far below the seasonal average, according to government data. U.S. crude stockpiles expanded for a 15th week, although at a slower pace, while supplies at the Cushing storage hub rose further.

Traders hoping the pace of weekly gains will slow

The OPEC+ coalition that includes Saudi Arabia and Russia started implementing daily output cuts of almost 10 million barrels a day on May 1, while in the U.S. -- the world’s biggest producer -- prominent shale explorers and companies such as Chevron Corp. have flagged supply curbs. While there are signs of returning demand, most analysts don’t see a rebound to pre-virus levels for at least a year, with some questioning if that will ever happen.

In American states that have loosened coronavirus lockdowns, fuel demand is picking up, with parts of Florida reporting gasoline consumption is down just 25-30%, from 50% previously. Refiner Delek U.S. Holdings Inc. said Wednesday it’s seeing demand improve in rural areas of Texas and Arkansas.

Read: In a Gloomy Oil Market, India Pump Prices Echo $100-Plus Crude

“The market has become bipolar, caught between optimism and pessimism over the supply-demand gap narrowing,” said Vandana Hari, founder of Vanda Insights. “I would expect continuing volatility in the coming days.”

Prices
  • West Texas Intermediate for June delivery added 0.4% to $24.08 a barrel on the New York Mercantile Exchange as of 11:05 a.m. Singapore time after falling as much as 2.4% earlier
  • Brent for June settlement was little changed at $29.75 after losing $1.25 on Wednesday
  • Crude futures rose 0.6% to 247.9 yuan a barrel on the Shanghai International Energy Exchange

U.S. crude stockpiles expanded by 4.59 million barrels last week, according to Energy Information Administration data on Wednesday. Inventories at Cushing, Oklahoma, the delivery-point for WTI, rose by 2.07 million barrels to 65.4 million. Gasoline supplies fell for a second week.

Saudi Aramco delayed the release of its key monthly pricing for June crude exports for a second time, according to people with knowledge of the matter. The state oil producer had already delayed the announcement to Wednesday from Tuesday.

Other oil-market news
  • As European countries take the first tentative steps toward loosening lock-downs, oil tankers are hauling millions of barrels of diesel to a continent that doesn’t need them.
  • Russia plans to swiftly achieve its new oil production target and signaled it aims to fully comply with the new OPEC+ deal as the group tries to revive a heavily oversupplied market.

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