Oil prices rose on Friday, but were on course for their third straight weekly loss as production shutdowns failed to keep pace with the collapse in demand caused by the coronavirus crisis, as reported by Reuters.
The oil market has experienced unprecedented turbulence since U.S. prices fell into negative territory on Monday for the first time ever and international benchmark Brent sank to two-decade lows.
Despite a tentative rally since, prices are heading for their eighth weekly loss in the last nine weeks. Brent is on course for a 23% weekly drop and U.S. West Texas Intermediate (WTI) set for a fall of around 6.50%.
Brent crude LCOc1 was up 22 cents, or 1.03%, at $21.55 at 1418 GMT after a 5% rise on Thursday. U.S. oil CLc1 rose 46 cents, or 2.79%, to $16.96 a barrel, after gaining 20% the day before. Both contracts traded within a range of around $2 a barrel.
“After the price crash earlier this week, which seems to have made every person on the planet aware of the problems in the oil market, several relevant announcements of active crude production shut-ins have made the rounds,” JBC Energy said.
Continental Resources Inc, the largest oil producer in North Dakota has halted most of its production in the U.S. state and notified some customers it would not supply crude, people familiar with the matter said.
Under a deal agreed between the Organization of the Petroleum Exporting Counties and other producers including Russia and Azerbaijan, a grouping known as OPEC+, output cuts of 9.7 million barrels bpd should take effect from May.
But Kuwait’s state news agency KUNA said on Thursday the OPEC producer would begin cutting supplies to international markets without waiting for the official start of the deal.
Azerbaijan’s Azeri-Chirag-Guneshli oil project will also have to cut output sharply from May to fulfil commitments under the deal, four sources told Reuters.
But with global storage space filling fast and oil demand shrinking by around 30%, those shut-ins are so far too little to rebalance the market.
“Unless more production shuts down, the extracted oil will literally have nowhere else to be stored, which implies a forced shutdown across several locations,” Head of Oil Markets at Rystad Energy Bjornar Tonhaugen said.
In China, where the coronavirus outbreak started late last year, analysts said fuel sales should pick up in the second quarter as Beijing eases curbs to contain the pandemic.
Meanwhile, U.S. legislators approved a nearly $500 billion bill for relief from the pandemic, providing support to small businesses and hospitals. The package raises U.S. spending to combat the crisis to nearly $3 trillion.
The global economy may still see a record contraction this year, according to a Reuters poll.
Additional reporting by Aaron Sheldrick in TOKYO; editing by Alexander Smith, Louise Heavens and Barbara Lewis
