Oil dropped to its lowest level in more than 18 years on Wednesday amid reports suggesting persistent oversupply and collapsing demand due to global coronavirus-related lockdowns could continue to hammer prices.
The International Energy Agency (IEA) on Wednesday forecast a 29 million barrel per day (bpd) dive in April oil demand to levels not seen in 25 years and said no output cut could fully offset the near-term falls facing the market.
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Brent crude fell $1.91, or 6.45%, to settle at $27.69, giving up an earlier gain. U.S. West Texas Intermediate crude fell 24 cents, or 1.19%, to settle at $19.87 per barrel, its lowest settle since Feb. 2002.
According to data from the U.S. Energy Information Administration, for the week ending April 10 inventory increased by 19.2 million barrels. Analysts polled by FactSet had been expecting a rise of 12.02 million barrels.
"There is no feasible agreement that could cut supply by enough to offset such near-term demand losses," the IEA said in its monthly report. "However, the past week's achievements are a solid start."
The drop in prices and demand has pushed global producers to agree unprecedented supply cuts.
The Organization of the Petroleum Exporting Countries (OPEC), along with Russia and other producer - a grouping known as OPEC+ - has partnered with other oil-pumping nations, such as the United States, in the record global supply pact.
Officials and sources from OPEC+ states indicated the IEA, the energy watchdog for the world's most industrialised nations, could announce purchases of oil for storage of up to several million barrels to buoy the deal.
But as of Wednesday, no such IEA purchases had materialised. The agency, in its report, said it was "still waiting for more details on some planned production cuts and proposals to use strategic storage."
The United States, India, China and South Korea have either offered or are considering such purchases, the IEA added.
Some analysts said they expect more downward pressure on the market without a demand recovery.
"The slow implementation of the agreement, the risk of non-compliance and no firm commitment from others to follow suit could see the market remain under pressure until the pandemic loosens its grip to let fuel demand recover," said Saxo Bank analyst Ole Hansen.
The IEA report added to downward pressure caused by rising inventories.
Industry group the American Petroleum Institute said on Tuesday U.S. crude inventories increased by a bigger than expected 13.1 million barrels in the week to April 10.