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US Crude Slips Below $20 on Supply Build, Bearish IEA Forecast

April 15, 2020 at 16:50 by Andrew Moran

Crude oil futures are plummeting in the middle of the trading week after the US government reported a bigger-than-expected increase in domestic inventories. Oil is also slumping on a forecast that crude demand is poised for a record drop amid the coronavirus pandemic that triggered a “Black April.” With the Organization of the Petroleum Exporting Countries (OPEC)’s production cut falling short of what the market wanted, crude may tumble to analysts’ predictions of prices hitting the low teens.

May West Texas Intermediate (WTI) crude futures declined $0.58, or 2.88%, to $19.53 per barrel at 16:26 GMT on Wednesday on the New York Mercantile Exchange. Crude has cratered 25% over the last week, adding to its year-to-date loss of 68%.

Brent, the international benchmark for oil prices, is also cratering midweek. June Brent crude futures fell $2.10, or 7.09%, to $27.50 a barrel on London’s ICE Futures exchange. Despite Brent’s 4% jump so far this month, prices have slipped more than 18% in recent sessions. YTD, Brent is down 58%.

According to the US Energy Information Administration (EIA), domestic crude stockpiles surged 19.2 million barrels for the week ending April 10, which is nearly double what the market had anticipated. This is the 12th consecutive weekly supply build. Gasoline inventories rose 4.9 million barrels, while distillate supplies advanced 6.3 million barrel.

The Baker Hughes total oil rig count stands at 602, down from 664 in the previous week.

On Wednesday morning, the International Energy Agency (IEA) published its latest monthly Oil Market Report that estimated a drop in demand of 9.3 million barrels per day (bpd). Researchers say this is equivalent to a decade’s worth of growth and would represent the lowest amount of demand since 1995. Fatih Birol, head of the Paris-based IEA, was blunt in his assessment:

We may see it was the worst year in the history of global oil markets.

Birol noted in the report that OPEC’s decision to reduce global output by 9.7 million bpd would help ease the situation, and other oil-rich nations are slashing production amid 20-year-low prices. Plus, nations like China, South Korea, and the US are looking to purchase more oil to store away in strategic reserves. There could be an energy recovery in the second half of 2020, but any return to normalcy would be gradual and uncertain, the IEA explained.

In other energy commodities, May natural gas futures tumbled $0.025, or 1.65%, to $1.623 per million British thermal units (btu). May gasoline futures edged up $0.0075, or 1.02%, to $0.7273 per gallon. May heating oil futures shed $0.0283, or 3.00%, to $0.9159 a gallon.

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