Crude oil futures rise, but support seen weak

A pump jack operates in the Permian Basin oil and natural gas production area near Odessa Texas in the United States

Brent crude, the worldwide benchmark, fell 4.9 per cent to US$25 a barrel. West Texas Intermediate (WTI) crude futures were down 36 cents, or 1.6 per cent, at US$22.27 a barrel, having fallen 2 percentage points more than Brent this year.

US gasoline futures fell more than 20 per cent to $0.4789 a gallon, the lowest on record.

USA crude prices fell 29 percent on the week, recording their biggest weekly loss in nearly 30 years, as the world's top oil producers struggled to cope with the demand destruction caused by the novel coronavirus pandemic.

Oversupply is so extreme that regulators in Texas considered curbing production there for the first time in almost 50 years.

Prices have fallen to multi-year lows in recent weeks as lockdowns and travel restrictions to fight the virus hit demand, and top producers Saudi Arabia and Russian Federation engage in a price war.

Bankers, analysts and producers are downgrading demand forecasts by the day, with numbers fluctuating around a loss of around 10 million barrels per day.

Oil prices have fallen for four straight weeks and have given up about 60% since the start of the year.

While a return to USA oil supply management policies of the 1970s and 80s would "help support prices in the third and fourth quarter above our $30 and $40 a barrel Brent forecast, they would simply replace OPEC's arti?cial price support policy with another", the bank said, referring to the Organization of the Petroleum Exporting Countries, of which Saudi Arabia is a key member. Many oil companies have rushed to slash spending and some producers have already begun releasing employees.

Oil refiners worldwide are slashing production or considering cuts as the pandemic causes the evaporation of fuel demand.

The six-month spread of Brent futures hit its steepest since 2009 at a discount of more than US$9, a contango structure which reflects the current oversupply.

"Set against this dismal outlook, the downward spiral in oil prices is poised to continue and may well reach the mid-teens".

Supply restraint by core-OPEC producers could push second-quarter Brent oil prices up to $30 a barrel, while US measures to support the market could underpin prices in the near term, Goldman Sachs said in a research note.

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