Economy

USA crude oil inventories show less-than-expected rise

USA crude oil inventories show less-than-expected rise”

Oil prices slipped back in Asian trade on Thursday, as a Senate vote on a massive stimulus package to help the coronavirus-ravaged USA economy was delayed.

Benchmark Brent crude fell 2.3 percent to $26.75 a barrel, while West Texas Intermediate (WTI) crude futures were down 2.7 percent at $23.84. $2 trillion emergency stimulus will bolster economic activity. US crude futures fell 21 cents, or 0.9 per cent, to $23.80 a barrel. Both contracts are down about 60% this year.

The losses were said to have been incurred partly due to Fatih Birol, executive director of the International Energy Agency, warning that demand could drop by as much as 20 million barrels per day (bpd), and by the White House deciding to rescind a crude buying offer after failing to win funding from Congress. Inventories, which have risen for nine straight weeks, are expected to keep growing as fuel demand declines and refineries pare back activity. While oil producers such as OPEC and Russian Federation might try to offset that with production cuts, "We expect a demand shock of this magnitude to overwhelm any supply response", the Goldman analysts say.

"The scale of the demand collapse will require a large amount of production to be shut-in, of potential several million barrels per day", the bank said, adding that such a hit on production would not likely be reversed quickly.

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Although oil futures received a "sentiment-led boost this morning, the challenge for the physical oil market is a looming and growing oversupply which will cause a "nowhere to hide" situation very soon", said Bjornar Tonhaugen, head of oil markets at Rystad Energy.

"Even if we do see some restraint from the Saudis, the world is still set to see a significant oil surplus over 2Q20, given the demand hit we are now seeing".

Meanwhile, data released by the Energy Information Administration (EIA) on Wednesday showed crude oil inventories in the USA rose by 1.6 million barrels for the week ended March 20, against expectations for a 2.8 million barrels increase.

Products supplied, a proxy for US demand, dropped almost 10% to 19.4 million bpd, EIA data showed.

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