Some hopes were created on Tuesday after U.S. President
Donald Trump and Russian President Vladimir Putin agreed to talks to stabilize
energy markets, with benchmarks climbing off 18-year lows hit as the
coronavirus outbreak cut fuel demand worldwide.
Trump and Putin agreed during a phone call to have their top
energy officials discuss stabilizing oil markets, the Kremlin said on Monday.
On this flimsiest pretext, oil prices are showing signs of clawing back from a near
18-year low.
Expectations were partly marred when crude oil benchmarks
opened April mixed on Wednesday, following their biggest-ever quarterly and
monthly losses, overshadowed by fears of global oversupply as data showed a
bigger-than-expected rise in inventories in the United States. Brent futures
were traded at US$26.14/barrel by 0032 GMT, while WTI futures were traded at US$20.75.
Opening session of today left oil prices marooned near their
lowest levels since 2002 amid the global coronavirus pandemic that has brought
worldwide economic slowdown and slashed oil demand. Crude futures ended the
quarter down nearly 70% after record losses in March.
Added to the trauma was rise in US crude inventories, up by
10.5 million barrels last week, far exceeding forecasts for a 4 million barrel
build-up, indicated by data from industry group the American Petroleum
Institute.
Oil slumped to a 17-year low as coronavirus lockdowns
cascaded through the world’s largest economies, leaving the market overwhelmed
by plummeting demand and piling up crude inventories.
Physical oil markets are struggling to store fuel, hit
by a double whammy of lockouts and shrinking demand. Western media is
portraying it a war for market share between Saudi Arabia and Russia.
The world normally uses 100 million barrels of oil day, but
forecasters predict as much as a quarter of that has disappeared in just a few
weeks. The plunge in consumption is unprecedented. The great crash of 1929, the
twin oil shocks of the 1970s and the global financial crisis don’t come close.
Global oil demand is in freefall and consumption
may decline by as much as 20 million barrels a day, according to the
International Energy Administration.
The bearish mood in the market hasn’t improved by a rift
within the Organization of the Petroleum Exporting Countries (OPEC). Saudi
Arabia and other members of OPEC were unable to come to an agreement on Tuesday
to meet in April to discuss sliding prices.
It is very unlikely that OPEC, with or without Russia or the
United States, will agree to production cut to contain global crude oil glut,
mainly due to record production by the United States.
