Crude oil edges above $0 per barrel, recovers after record wipeout

Oil prices rebounded on Tuesday, with US crude turning positive after having traded below $0 for the first time ever, but gains were capped amid unresolved concerns about how the market would cope with fuel demand decimated by the coronavirus pandemic.
US West Texas Intermediate (WTI) crude for May delivery rose $38.73 to $1.10 a barrel by 0117 GMT after settling down at a discount of $37.63 a barrel in the previous session.
The May contract expires on Tuesday, while the June contract, which is more actively traded, jumped $1.72 cents, or 8.4 per cent, to $22.15 a barrel. Global benchmark Brent crude for June delivery was up 49 cents, or 1.9 per cent, at $26.06 per barrel.
Earlier, US crude oil futures collapsed below $0 on Monday for the first time in history, amid a coronavirus-induced supply glut, ending the day at a stunning minus $37.63 a barrel as desperate traders paid to get rid of oil. Brent crude, the international benchmark, also slumped, but that contract was nowhere near as weak because more storage is available worldwide.
Traders fled from the expiring May US oil futures contract in a frenzy on Monday with no place to put the crude, but the June WTI contract settled at a much higher level of $20.43 a barrel.
"Demand destruction from Covid-19 will see a slower expected reopening of the U.S. economy," said Edward Moya, senior market analyst at broker OANDA, predicting a weak period for oil prices. "The WTI crude June contract was able to hold the $20 a barrel level and is seeing a modest gain following the painful rollover of the May contract."
Oil prices have skidded as travel restrictions and lockdowns to contain the spread of the coronavirus curbed global fuel use, with demand down 30 per cent worldwide. That has resulted in growing crude stockpiles with storage space becoming harder to find.
The main U.S. storage hub in Cushing, Oklahoma, the delivery point for the U.S. West Texas Intermediate (WTI) contract, is now expected to be full within a matter of weeks.
"Today it's pretty clear that a major issue in the market is a glut in the United States and lack of storage capacity," said Michael McCarthy, chief market strategist, CMC Markets in Sydney.
Faced with the situation, the Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia, a grouping known as OPEC+, have agreed to cut output by 9.7 million barrels per day (bpd). But that will not take place before May, and the size of the cut is not viewed as big enough to restore market balance.
"Not even the OPEC+ supply agreement is likely to stem the flow in selling in the short term," ANZ Research said in a note.
Meanwhile, U.S. crude inventories were expected to rise by about 16.1 million barrels in the week to April 17 after posting the biggest one-week build in history, according to five analysts polled by Reuters. Analysts expected gasoline stocks to rise by 3.7 million barrels last week.
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The American Petroleum Institute is set to release its data at 4:30 p.m. (2030 GMT) on Tuesday, and the weekly report by the U.S. Energy Information Administration is due at 10:30 a.m. on Wednesday.
Will to add 75 mn barrels to nation's strategic petroleum reserve: Trump
United States President Donald Trump on Monday said that he is planning to add as much as 75 million barrels of oil to the nation's strategic petroleum reserve as the oil prices crashed due to the coronavirus pandemic.
"We are filling up our national petroleum reserves. We are looking to put as much as 75 million barrels into the reserves themselves," Trump said at a daily briefing on Monday.
He said that his administration will look into halting oil imports from Saudi Arabia after oil prices in the United States plummeted into negative.
"We'll look at it," Trump said on Monday when asked if the United States will block Saudi oil shipments into the United States after prices went negative earlier in the day.

Coronavirus impact: Brent crude dives over 7% to lowest since 2003

Oil prices slumped anew on Friday with Brent North Sea crude plumbing a 17-year low owing to massive oversupply as the coronavirus crisis paralyses global demand.
Around 1435 GMT, Brent for May delivery was down 7.33 percent from Thursday, at USD 24.41 a barrel. West Texas Intermediate fell 5.97 percent to USD 21.25.
Oil has tanked in recent weeks on the back of collapsing demand, as COVID-19 slams the brakes on economic activity and the world's appetite for energy. Crude futures spiralled even lower this month after a fierce price war erupted between Riyadh and Moscow.
"The coronavirus pandemic is reducing oil demand," wrote analysts at the Wood Mackenzie research consultancy in a note to clients.
"The OPEC+ production restraint agreement fell apart on 6 March and Saudi Arabia is rapidly increasing supply.
"The result: Brent crude has plunged," they added.
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Until recently, the Organization of the Petroleum Exporting Countries (OPEC) and Russia had cooperated closely since 2016 to curb production, support prices and protect their precious revenues.
That all changed this month when Saudi Arabia launched a price war with Moscow, after OPEC and non-member Russia failed to clinch an output-cutting deal to curb the market impact of the deadly COVID-19 outbreak.
The perfect storm has sent oil prices collapsing to their lowest levels in almost two decades, while also stretching global crude storage capacity.
"With Saudi Arabia attempting to flood the oil market by ramping up production to counter Russia, oil prices have halved this month ... prompting countries to stockpile under the low prices," said Sun Global Investments head Mihir Kapadia.
"Oil stockpiles around the world climbed up as major refineries in core markets such as China were shutdown due to the pandemic.
"According to industry reports oil storage levels globally have already reached 75 percent of capacity, and continued stockpiling under closed demand would crash the prices to USD 10 in the coming months unless industrial activity restarts.

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With 3 billion people in lockdown, global oil requirements could drop by 20%, International Energy Agency head Fatih Birol said as he called on major producers such as Saudi Arabia to help to stabilise oil markets.
The calls may not be enough to bring the market back into balance.
"We have our doubts about whether Saudi Arabia will allow itself to be persuaded so easily to return from the path of revenge that it only recently embarked upon," said Commerzbank analyst Eugen Weinberg, referring to the price war being waged between Russia and Saudi Arabia.
The Group of 20 major economies on Thursday pledged to inject more than $5 trillion into the global economy to limit job and income losses from the coronavirus and "do whatever it takes to overcome the pandemic".
Leaders of the US House of Representatives are determined to pass a $2.2 trillion coronavirus relief bill by Saturday at the latest, hoping to provide quick help as deaths mount and the economy reels.
Mainland China reported its first locally transmitted coronavirus case in three days and 54 new imported cases as Beijing ordered airlines to implement sharp reductions in international flights, for fear travellers could reignite the outbreak.
As global oil demand plummets, Saudi Arabia is struggling to find customers for its extra oil, undermining its bid to seize market share by expanding production.
"It does not seem as though there is anything the Saudis or the broader OPEC+ group can do to push the market significantly higher," said ING analyst Warren Patterson.
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"The demand destruction we are seeing does mean the level of (production) cuts that would be needed by the group would be just too much to stomach," he said.
Russian Deputy Energy Minister Pavel Sorokin said the coronavirus outbreak has dented global oil demand by 15 million to 20 million barrels per day (bpd).
Oil and gas research group JBC Energy said it had "drastically" reduced its oil demand forecast for 2020, expecting a decline of more than 7.4 million bpd on average.

What oil at $50 a barrel means for the world economy, India

Just a couple of months ago, major oil trading houses were predicting the return of $100 crude. Now, with oil prices at half that level, here’s a look at what the slump means for the world economy.
Energy importers like India and South Africa will benefit; oil producers such as Russia and Saudi Arabia will hurt. Central banks under pressure to raise interest rates will get a reprieve; those looking to revive prices, such as the Bank of Japan, face another headwind.

Ultimately, much depends on how world oil demand shapes up as it gets battered by a stronger dollar and global trade spats, and how the biggest producers react.
Saudi Arabia sits between Russia on one side, its ally in managing production to support prices, and the U.S., where President Donald Trump is sending Twitter messages to the producer to get prices down. All eyes are on the Group of 20 meeting this week to see if a consensus on output emerges between the Saudis and Russians, and if that can carry through to the OPEC gathering next week.
Here’s a Bloomberg Economics chart showing net oil imports (or exports) as a percentage of GDP -- cheaper oil helps those at the top of the chart and hurts those at the bottom.
What does it mean for global growth?
With the northern hemisphere winter approaching, the oil-price slump will cushion households and businesses during a period of slowing economic growth. Countries that import oil and have current-account deficits, such as South Africa, will also stand to benefit. China is the world’s biggest importer of oil and is already battling a broader moderation in its economy amid a trade war with the U.S. and domestic challenges.
What does it mean for inflation?
Lower oil prices mean less pressure on inflation and less pressure on central banks to raise interest rates. One example: Bloomberg Economics says the energy slump is a game changer for India and could mean the Reserve Bank of India shifts to a neutral outlook.
How will emerging markets handle the price drop?
Every $10-per-barrel fall in oil prices boosts incomes by about 0.5 to 0.7 percent of gross domestic product in major emerging market oil importers, Capital Economics analysts estimate. The same discount will cause a 3 percent to 5 percent loss of GDP in most of the Gulf economies, and a slowdown of 1.5 percent to 2 percent of GDP in the U.A.E, Russia and Nigeria, all on an annualized basis, according to the analysts.
What does it mean for the world’s biggest economy?
Trump has described the slump in oil prices as the equivalent of a tax cut. Still, diminishing American reliance on imported oil due to the emergence of shale production will erode the positive economic consequences at the industry level.