On Thursday, oil prices were up on the back of an unexpected fall in US crude oil inventory. However, the gain was still limited by the worry of the second infection wave of coronavirus in some countries.
Brent crude oil futures rose by 0.2% or 6 cents to USD29.25/barrel at 04.01 GMT, and US WTI crude oil futures jumped by 0.7% or 18 cents to USD25.47/barrel.
According to the US Energy Information Administration (EIA), US crude oil stockpiles dropped unexpectedly by 745,000 barrels to 531.5 million barrels in the week ended May 8. It was the first fall since January, in contrast with analysts’ expectation in a Reuters poll of a 4.1 million barrels increase.
In the last two weeks, oil prices have improved as many countries around the world are easing their restriction on activities to limit the spread of coronavirus. Fuel demand is slowly inching up as people’s mobility increase.
However, as new cases of coronavirus have emerged again in South Korea and China, concerns over the possibility of the second wave of the outbreak, which could harm the economy and fuel demand, have risen.
Analyst Edward Moya of OANDA commented, “It is hard to get excited about a steady rebound for crude demand when the world’s largest economy has significant uncertainty about the outlook and big downside risks.”
He opined that to support prices in the upcoming weeks, a much bigger drawdown would be necessary.
On Wednesday, the Organization of Petroleum Exporting Countries (OPEC) cut its estimate on 2020 global oil demand. Demand to shrink by 9.07 million bpd year-on-year, worse than its previous estimate of a 6.85 million bpd of decline.
OPEC also expected the steepest demand decline would happen in the second quarter.
ING Economics said that the second-quarter demand for OPEC oil is just 16.77 million bpd, well below OPEC’s output level even when the OPEC and alliance (OPEC+) have fully committed to the cut pact.
Saudi Arabia has announced its additional output cut outside its quota in the OPEC+ deal by 1 million bpd. Starting in June, Saudi’s output would be 7.5 million bpd.
