Oil prices fell on Wednesday despite expectations that major producers have moved closer to an agreement to enact deeper output cuts aimed at offsetting the slump in demand caused by the coronavirus outbreak.
The U.S. Energy Information Administration said Wednesday that for the week ending Feb. 28 inventories increased by 800,000 barrels, which was smaller than analysts had been expecting.
Saudi Arabia and other OPEC members are seeking to persuade Russia on Wednesday to join them in large additional oil output cuts to prop up prices which have tumbled because of the coronavirus outbreak.
"With demand-side uncertainties having already dragged Brent futures about 19 percent lower since the start of the year ... oil's upside appears significantly capped amid persistent concerns over the coronavirus outbreak," said Han Tan, market analyst at FXTM.
A technical panel of several representatives from OPEC states, Russia and other producers recommended on Tuesday cutting output by as much as an extra 1 million barrels per day (bpd) during the second quarter only.
"What offered relatively more support to oil yesterday was that the OPEC+ Joint Technical Committee recommended to OPEC+ to increase the level of additional cuts. This also appears to be providing some early morning strength to the oil market today," said ING analyst Warren Patterson.
Goldman Sachs has again cut its Brent price forecast to $45 a barrel in April, while expecting Brent gradually recovering to $60 a barrel by the year-end.
The bank said while an output cut by OPEC "will help normalize oil demand and inventories later this year, they can't prevent an already started large oil inventory accumulation."
Morgan Stanley also cut its second-quarter 2020 Brent price forecast to $55 per barrel and its WTI outlook to $50 on expectations that China's 2020 oil demand growth would be close to zero and that demand elsewhere may weaken because of the virus.
The U.S. Federal Reserve cut interest rates on Tuesday in a bid to shield the world's largest economy from the impact of the coronavirus, but the decision offered only limited support for crude.
"Yet far from easing virus anxieties, the surprise move had the opposite effect. Market players fretted over the suddenness of the Fed's decision," said Stephen Brennock of oil broker PVM.
U.S. crude oil inventories rose in the most recent week, while gasoline and distillate stocks fell, data from industry group the American Petroleum Institute showed on Tuesday.