Oil prices tumbled Wednesday after the International Energy Agency warned of a record drop in crude demand this year due to the COVID-19pandemic, which has forced countries around the world to close their economies.
West Texas Intermediate crude for May delivery CL.1, -2.73% fell 46 cents, or 2.2%, to $19.65 a barrel, after dropping more than 10% Tuesday to a two-week low on the New York Mercantile Exchange. June Brent crude BRNM20, -4.12% slid 4%, or $1.25, to $28.35 a barrel. The contract fell 6.7% to $29.60 a barrel on ICE Europe, ending at the lowest since April 1 on Tuesday.
The Paris-based IEA estimated a drop in demand of 9.3 million barrels a day this year, equivalent to a decade’s worth of growth. In the near term, demand in what the agency is referring to as “Black April” for the energy market, is forecast to drop to its lowest since 1995.
Investors have all but brushed aside a deal by members of the Organization of the Petroleum Exporting Countries and allies, collectively known as OPEC+, Sunday to cut overall crude-oil production by 9.7 million barrels a day starting on May 1 through June 30 of this year.
“Whether today’s slump in oil prices serves to rally OPEC+ into another cut remains to be seen,” said Joshua Mahony, senior market analyst at IG, in a note to clients. “However, with the group having difficulty achieving the 9.7m bpd cut, an inability to enact further restrictions would likely lead to further downside for the months ahead.”
Meanwhile, crude supplies are expected to continue to swell. The American Petroleum Institute reported late Tuesday that U.S. crude supplies rose by 13.1 million barrels for the week ended April 10, according to sources. The API data also reportedly showed gasoline stockpiles up by 2.2 million barrels, while distillate inventories rose by 5.6 million barrels.
More closely watched inventory data from the Energy Information Administration is scheduled for release Wednesday morning. The EIA data are expected to show crude inventories rose by 10.1 million barrels last week, according to analysts polled by S&P Global Platts. They also forecast a supply rise of 7.1 million barrels for gasoline, while distillates stocks are expected to climb by 1.8 million barrels.