Oil prices fell on Wednesday after U.S. crude inventories rose last week by the most since 2016, while gasoline demand fell sharply due to the coronavirus pandemic.
Crude inventories rose by 13.8 million barrels in the week to March 27 to 469.2 million barrels, the U.S. Energy Information Administration said Wednesday. That was the biggest one-week rise since 2016, and analysts expect stocks to keep rising as refineries curb output and gasoline demand falls.
West Texas Intermediate crude fell 17 cents, or 0.8%, to settle at $20.31 per barrel. Brent crude fell $1.35, or 5.1%, to $24.99 a barrel. WTI traded at a session low of $19.90 a barrel. Brent had fallen to $21.65 on Monday, its lowest since 2002, when the now-expired May contract was the front month.
The market has slumped on pledges of higher output from Saudi Arabia and Russia after a supply pact collapsed and the sharp fall in demand because of the coronavirus pandemic. Global benchmark Brent crude fell 66% in the first three months of 2020 - its biggest ever quarterly loss.
"Global inventories will be chock full by mid-May. I think the market can continue to decline further," said Gene McGillian, a broker and oil analyst at Tradition Energy.
"There's no signs of reproachment with producers and with further demand destruction we could get another $5 taken from the market."
U.S. state governments have issued orders trying to halt the spread of the virus, and many residents are staying out of cars. Gasoline demand fell by the most ever in one week, with products supplied, a proxy for demand, dropping by 2.2 million barrels per day to 6.7 million bpd. That augurs for more refining cutbacks down the road.
"April will be one of the toughest months in history for oil, and this is no April fool's joke," said Bjornar Tonhaugen of Rystad Energy.
"The market is oversupplied in April to the tune of 25 million barrels per day. There's nowhere to hide from this tsunami of oversupply."
The bearish mood has been fueled by a rift within the Organization of the Petroleum Exporting Countries (OPEC). Saudi Arabia and other OPEC members have been unable to agree to a technical meeting in April to discuss sliding prices.
An OPEC-led supply deal fell apart on March 6 when Russia refused to cut output further. Saudi Arabia has already begun to boost output, a Reuters OPEC survey showed on Tuesday, and is expected to pump more in April.
"It is very unlikely that OPEC, with or without Russia or the United States, will agree a sufficient volumetric solution to offset oil demand losses," BNP Paribas analyst Harry Tchilinguirian said in a report on Tuesday.
U.S. President Donald Trump on Tuesday said he would join Saudi Arabia and Russia, if need be, for talks about the fall in oil prices.