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Oil prices mixed as demand shrinks, but stimulus hopes support

MELBOURNE (Reuters) – Oil prices were mixed on Thursday following three days of gains, with the prospect of rapidly dwindling demand due to coronavirus travel bans and lockdowns offsetting hopes a U.S. $2 trillion emergency stimulus will shore up economic activity.

West Texas Intermediate (WTI) crude CLc1 futures slipped 4 cents, or 0.2%, to $24.45 as of 0018 GMT, while Brent crude LCOc1 futures rose 12 cents, or 0.4%, to $27.51.

“With lockdowns in many countries, expectations of oil demand contracting by more than 10 million barrels per day (bpd) are rising. Such demand loss will increase the supply glut,” Australia and New Zealand Banking Group analysts said in a note.

The collapse of a supply-cut pact between the Organization of the Petroleum Exporting Countries (OPEC) and other producers led by Russia is set to boost oil supply, with Saudi Arabia planning to ship more than 10 million bpd from May.

“Production increases by Saudi Arabia and Russia loom, and things still look uncertain due to the ongoing price war between these two countries,” ANZ said.

U.S. crude inventories rose by 1.6 million barrels in the most recent week, the U.S. Energy Information Administration said on Wednesday, marking the ninth straight week of increases.

Products supplied, a proxy for U.S. demand, dropped nearly 10% to 19.4 million bpd, EIA data showed.

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Oil falls more than $1 as coronavirus spreads

NEW YORK (Reuters) – Oil prices fell more than $1 a barrel at the start of the trading session on Sunday, as more governments ordered lockdowns to curb the spread of the global coronavirus pandemic that has slashed the demand outlook for crude.

Brent crude LCOc1 futures fell $1.84, or 6.8%, to $25.14 a barrel by 2215 GMT. West Texas Intermediate (WTI) crude CLc1 futures fell $1.26, or 5.6%, to $21.37 a barrel.

Oil prices have fallen for four straight weeks and have lost about 60% since the start of the year. The coronavirus, which has infected more than 325,000 and killed over 14,000 worldwide, has disrupted business, travel and daily life. Many oil companies have rushed to cut spending and some producers have already begun putting employees on furlough.

The market has had to contend with the twin shocks of the demand destruction caused by the coronavirus pandemic and the unexpected oil price war that erupted between producers Russia and Saudi Arabia earlier this month.

The current production cut deal expires March 31.

“We believe oil prices will continue to fall into the teens in the short term amid disaster demand destruction, building global stocks and no production limits after April 1,” said Joseph McMonigle, senior energy policy analyst at Hedgeye Potomac Research, in a note.

Demand is expected to fall by more than 10 million barrels per day (bpd), or about 10% of daily global crude consumption, said Giovanni Serio, head of research at Vitol, the world’s biggest oil trader.

Goldman Sachs estimated demand loss could total 8 million barrels per day (bpd), brought about by countries slowing economic activity to combat the coronavirus outbreak.

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U.S. crude hits 18-year low as lockdowns, restrictions spread

LONDON (Reuters) – Oil prices fell for a third session on Wednesday with U.S. crude futures tumbling to an 18-year low as travel and social lockdowns sparked by the coronavirus epidemic knocked the outlook for demand.

U.S. crude Clc1 was down $2.51 cents, or over 9%, at $24.44 per barrel by 1219 GMT, having earlier fallen to $24.42, its lowest since mid-2002.

The last time oil was trading that low, China had only begun its rise as a major global economic power that propelled the world’s oil consumption to record highs in subsequent years.

Brent crude LCOc1 was trading down $1.39, or nearly 5%, at $27.34 a barrel, after dropping to $27.31, its lowest since early 2016.

“The oil demand collapse from the spreading coronavirus looks increasingly sharp,” Goldman Sachs said in a note forecasting a fall in the price of Brent to as low as $20 in the second quarter, a level not seen since early 2002.

The bank expects a demand contraction of 8 million barrels per day (bpd) by late March and an annual decline in 2020 of 1.1 million bpd, which it said would be the biggest on record.

In efforts to support economies, the world’s richest nations prepared to unleash trillions of dollars of spending to lessen the fallout from the coronavirus outbreak, as well as imposing social restrictions not seen since World War Two.

Rystad Energy projects a year-on-year decrease of 2.8% or a fall of 2.8 million bpd in global oil demand this year. “To put the number into context, last week we projected a decrease of just 600,000 barrels,” Rystad said.

The consultants expect demand in April to fall by 11 million bpd compared with 2019.

The impact on demand is starting to show in official statistics with Japan’s trade bureau saying on Wednesday that crude imports into the world’s third-biggest economy in February were down 9% from a year earlier.

Virgin Australia became the latest airline to shut down its international network with the suspension of all overseas flights, while Australian Prime Minister Scott Morrison warned that the situation could last six months or more.

Elsewhere, Iraq’s oil minister pleaded for an emergency meeting between members of the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers to discuss immediate action to support the market.

A price war between OPEC leader Saudi Arabia and Russia after talks on coordinated output cuts collapsed this month is adding pressure to the market.

The Kremlin said on Wednesday Russia would like to see the oil price higher than current levels.

But Saudi Arabia’s energy ministry said it had directed national oil company Aramco to continue to supply crude oil at a record high 12.3 million bpd over the coming months.

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Iraqi oil minister, Thamer al-Ghadhban, asked OPEC to help “urgently achieve” extraordinary meetings of the OPEC+ group – OPEC plus partners including Russia – to “discuss all possible ways” to rebalance the oil market.

“With the Saudis and Russians in a fierce battle for market share, it is difficult to see any quick resolution on this front,” ING said referring to the Iraqi request for a meeting.

“That said, the only thing that will likely bring them back to the discussion table is even lower prices,” the bank said.

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Oil falls 4% as coronavirus pandemic prompts Trump travel ban

TOKYO (Reuters) – Oil prices fell for the second straight day on Thursday amid a broad decline in global markets after the United States banned travel from Europe following the World Health Organization’s decision to declare the coronavirus outbreak a pandemic.

The slump in oil is being compounded by the threat of a flood of cheap supply as Saudi Arabia promised to raise output to a record high in its standoff with Russia.

Brent crude LCOc1 was trading down $1.65, or 4.6%, at $34.14 by around 0718 GMT, a little above earlier lows. The contract fell nearly 4% on Wednesday.

U.S. crude CLc1 was down $1.38, or 4.2%, at $31.60 after also dropping 4% in the previous session.

The two benchmarks are down about 50% from highs reached in January and had their biggest one-day declines on Monday since the 1991 Gulf War after Saudi Arabia launched a price war.

The price difference between near-term and longer-term Brent prices LCOc1-LCOc6 also widened to the most in five years, prompting traders to fill tankers with oil to store for later delivery when they are betting prices will be higher.

Global shares were also down on Thursday after U.S. President Donald Trump said the United States will suspend all travel from Europe as he unveiled measures to contain the coronavirus epidemic.

The travel ban, which excludes Britain, will hit U.S. airlines “extremely hard”, their industry association said.

The surprise move is likely to mean a further drop in demand for jet and other fuels in an already battered oil market, although just how much is hard to quantify.

“This is what a large positive supply shock and a large negative demand shock looks like,” said Lachlan Shaw, head of commodities research at National Australia Bank in Melbourne.

“It’s hard to come up with a more bearish scenario.”

The United Arab Emirates followed Saudi Arabia in announcing plans to boost oil output after the collapse last week of an agreement between OPEC, Russia and other producers, a grouping known as OPEC+, to withhold supply and buttress prices.

UAE’s national oil company, ADNOC, said it plans to raise crude sales to more than 4 million barrels per day (bpd) and accelerate a push to boost capacity by a quarter to 5 million bpd.

“Without OPEC+, the global oil market has lost its regulator and now only market mechanisms can dictate the balance between supply and demand,” said Espen Erlingsen, head of upstream research at Rystad Energy, which estimates that oil will need to fall to the low $20s to achieve equilibrium.

The U.S. Energy Information Administration (EIA) and the Organization of the Petroleum Exporting Countries (OPEC) have slashed forecasts for oil demand because of the coronavirus outbreak and now expect demand to contract this quarter.

Still, weekly data on U.S. inventories showed minimal effects from the coronavirus pandemic so far. Crude stocks increased by 7.7 million barrels, but inventories of gasoline and diesel fell sharply, as refining runs remain at seasonally low levels. [EIA/S]

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