Oil prices slipped overnight as global supply and demand worries erased earlier gains seen from an increase in Saudi Arabia’s official crude selling price and a surprise rise in Chinese exports last month.
Brent futures fell 26 cents, or 0.9 per cent, to settle at $US29.46 a barrel, while US West Texas Intermediate (WTI) crude lost 44 cents, or 1.8 per cent, to settle at $US23.55.
Earlier in the day, Brent was up over 5 per cent and WTI up over 10 per cent. For the week, Brent was still up about 11 per cent and WTI up about 18 per cent.
Both benchmarks have rallied sharply this week as countries have eased coronavirus-related lockdowns and fuel demand has rebounded modestly. Oil production worldwide is also declining to reduce a growing supply glut.
“We continue to be in a volatile market and this price pull back does not surprise me. I think there was some profit taking,” said John Kilduff, partner at Again Capital LLC in New York.
“The Saudi (price news) was supportive early in the day, but we still have significant headwinds in terms of the economy, demand and storage,” Kilduff said.
US crude inventories at the Cushing storage hub in Oklahoma rose by about 407,000 barrels in the week through May 5, traders said citing Genscape data.
US jobless claims, meanwhile, continued to rise, although at a slower pace with 3.2 million more people seeking unemployment benefits for the week ended May 2. The latest numbers lifted the total to about 33 million claims since March 21.
Analysts at Rystad Energy projected global oil demand would decrease 10.9 per cent in 2020 to 88.7 million barrels per day (bpd) from around 99.5 million bpd in 2019. Last week, the energy consultant forecast demand next year would average 88.8 million bpd.
Oil prices were much higher earlier in the day following reports from Saudi Arabia on crude prices and imports and exports in China.
Saudi Arabia increased its official selling prices (OSP) for June after cutting May exports to almost the lowest in a decade following a deal by global producers to reduce output to prop up prices.
“It is … likely seen as a strong indication that the Kingdom will follow through on its pledged supply cuts agreed at the 12 April OPEC+ emergency meeting,” Harry Tchilinguirian, head of commodity research at BNP Paribas, said.
The Organisation of the Petroleum Exporting Countries (OPEC) and allied producers – a grouping known as OPEC+ – agreed to cut production from May 1 by around 10 million bpd to help support prices.
In China, meanwhile, oil imports climbed to 10.42 million bpd in April from 9.68 million bpd in March, according to Reuters calculations based on customs data for the first four months of 2020.
However, the country’s imports for all goods fell, suggesting any recovery is some way off as economies around the world fall into recession.