Oil falls 4% towards $28 on oversupply concerns
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[April 15, 2020] By
Alex Lawler
LONDON (Reuters) - Oil fell 4% towards $28
a barrel on Wednesday, pressured by reports of persistent oversupply and
collapsing demand due to global coronavirus-related lockdowns and a lack
of coordinated oil purchases for strategic storage.
The International Energy Agency (IEA) on Wednesday forecast a 29 million
barrel per day (bpd) dive in April oil demand to levels not seen in 25
years and said no output cut could fully offset the near-term falls
facing the market.
Brent crude <LCOc1> fell $1.18, or 4%, to $28.42 a barrel at 1134 GMT,
giving up earlier gains. U.S. West Texas Intermediate crude <CLc1> slid
43 cents, or 2.1%, to $19.68.
"There is no feasible agreement that could cut supply by enough to
offset such near-term demand losses," the IEA said in its monthly
report. "However, the past week's achievements are a solid start."
Crude prices have tumbled this year, hitting an 18-year low of $21.65 a
barrel on March 30. The drop in prices and demand has pushed global
producers to agree unprecedented supply cuts.
The Organization of the Petroleum Exporting Countries (OPEC), along with
Russia and other producer - a grouping known as OPEC+ - has partnered
with other oil-pumping nations, such as the United States, in the record
global supply pact.
Officials and sources from OPEC+ states indicated the IEA, the energy
watchdog for the world's most industrialised nations, could announce
purchases of oil for storage of up to several million barrels to buoy
the deal.
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The sun is seen behind a crude oil pump
jack in the Permian Basin in Loving County, Texas, U.S., November
22, 2019. REUTERS/Angus Mordant/File Photo
But as of Wednesday, no such IEA purchases had materialised. The agency, in its
report, said it was "still waiting for more details on some planned production
cuts and proposals to use strategic storage."
The United States, India, China and South Korea have either offered or are
considering such purchases, the IEA added.
Some analysts said they expect more downward pressure on the market without a
demand recovery.
"The slow implementation of the agreement, the risk of non-compliance and no
firm commitment from others to follow suit could see the market remain under
pressure until the pandemic loosens its grip to let fuel demand recover," said
Saxo Bank analyst Ole Hansen.
The IEA report added to downward pressure caused by rising inventories.
Industry group the American Petroleum Institute said on Tuesday U.S. crude
inventories increased by a bigger than expected 13.1 million barrels in the week
to April 10. Official government inventory figures are due later on Wednesday.
(Additional reporting by Yuka Obayashi; Editing by Alexander Smith and David
Goodman and Kirsten Donovan)
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