OPEC cuts demand forecast; prices mixed

Oil prices were mixed overnight, as Brent crude rose modestly while US futures ended unchanged at an 18-year-low after some European countries said they would relax coronavirus restrictions even though OPEC lowered its global oil demand forecast. Brent futures gained 13 US cents, or 0.5 per cent, to settle at $US27.82 a barrel, while US West Texas Intermediate (WTI) crude ended the day unchanged at $US19.87, marking the second straight day at its lowest close since February 2002. The crude market has not been able to sustain a rally since the Organisation of the Petroleum Exporting Countries and allies, a group known as OPEC+, came to a deal at the weekend to drastically cut world supply. However, traders said that because some countries in Europe are considering easing lockdowns, that could augur for a rebound in fuel demand. Officials at the World Health Organisation warned countries to move with extreme caution before relaxing restrictions. “Some of Europe is starting to open up. That’s supportive for Brent,” said John Kilduff, partner at hedge fund Again Capital in New York. In its latest monthly report, OPEC forecast that global oil demand would contract by 6.9 million barrels per day (bpd), or 6.9 per cent, in 2020. That forecast, along with Wednesday’s report that US crude stockpiles rose by a record 19.2 million barrels last week tempered the optimism that grew out of the OPEC+ supply deal to reduce output by 9.7 million bpd for May and June. Hopes of cuts of another 10 million bpd from other countries, including the United States, could lower production by around 20 million bpd, although those cuts are expected to take months to come to fruition. Following the end of trading, Saudi Arabia and Russia, in a joint statement, said they would continue to monitor oil markets and were ready to take joint measures with the rest of OPEC+ if needed. “Oil prices must remain depressed to force shut-ins among non-cartelised producers,” said Norbert Ruecker, head of economics at Swiss bank Julius Baer, referring to producers such as the United States, where a lot of production is unprofitable at current prices. ConocoPhillips said it would cut US and Canadian oil production by around 225,000 bpd due to the collapse in crude prices. In Russia, energy firms have already significantly reduced oil export plans for May following the OPEC+ deal, three company sources and two traders told Reuters.