By Laura Sanicola
NEW YORK (Reuters) – Oil prices fell on Wednesday after data showed U.S. crude inventories rose last week by the most since 2016 while gasoline demand suffered its biggest weekly drop ever due to the coronavirus pandemic.
Crude inventories <USOILC=ECI> rose by 13.8 million barrels last week, the U.S. Energy Information Administration said. That was the biggest one-week rise since 2016, and analysts expect similar reports in coming weeks, as refineries curb output further and gasoline demand continues to decline.
West Texas Intermediate (WTI) crude <CLc1> fell 29 cents, or 1.5%, to $20.19 a barrel by 1:30 p.m. ET (1730 GMT), after hitting a low at $19.90.
June Brent crude <LCOc1> fell $1.45, or 5.5%, to $24.90 a barrel. The global benchmark fell to $21.65 on Monday, its lowest since 2002, when the now-expired May contract was the front month.
The market has slumped on pledges of higher output from Saudi Arabia and Russia after a supply pact collapsed and the sharp fall in demand because of the coronavirus pandemic. Brent crude fell 66% in the first three months of 2020 – its biggest ever quarterly loss.
“Global inventories will be chock full by mid-May. I think the market can continue to decline further,” said Gene McGillian, a broker and oil analyst at Tradition Energy.
“There’s no signs of reproachment with producers and with further demand destruction we could get another $5 taken from the market.”
U.S. state governments have issued orders trying to halt the spread of the virus, and many residents are staying out of their cars. Gasoline demand fell by the most ever in one week, with products supplied, a proxy for demand, dropping by 2.2 million barrels per day to 6.7 million bpd. That augurs for more refining cutbacks down the road.
“Demand is a disaster,” said Bob Yawger, director of energy futures at Mizuho in New York. “That’s the whole problem here. It’s horrible.”
The bearish mood has been fueled by a rift within the Organization of the Petroleum Exporting Countries (OPEC). Saudi Arabia and other OPEC members have been unable to agree to a technical meeting in April to discuss sliding prices.
An OPEC-led supply deal fell apart on March 6 when Russia refused to cut output further. Saudi Arabia has already begun to boost output, a Reuters OPEC survey showed on Tuesday, and is expected to pump more in April. [OPEC/O]
“It is very unlikely that OPEC, with or without Russia or the United States, will agree a sufficient volumetric solution to offset oil demand losses,” BNP Paribas analyst Harry Tchilinguirian said in a report on Tuesday.
U.S. President Donald Trump on Tuesday said he would join Saudi Arabia and Russia, if need be, for talks about the fall in oil prices.
(Additional reporting by Yuka Obayashi and Alex Lawler; Editing by Marguerita Choy and David Goodman)