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Oil Erases Gains With Five-Day Rally Juddering to a Halt


By Elizabeth Low and Alex Longley

(Bloomberg) Oil fell toward $23 a barrel in New York, snapping a run of gains that had seen prices double over five days.The drop reflects persistent concern that the global glut will take a long time to eliminate as demand remains crushed by the coronavirus. Economic data also weighed on prices, with the U.S. losing a record number of jobs in April and the European Union predicting steep contractions across the region.

WTI snaps a run of gains on Wednesday

Crude’s collapse has forced countries across the world to rein in oil production. Russian output was down 16% in the first five days of May, Interfax reported, while in the U.S., Plains All American Pipeline LP said it sees close to 1 million barrels a day of Permian shut-ins in May.

Though supply is falling, the extent of the damage to the global economy is becoming clearer. The European Commission said Italy, Spain and Greece are all facing contractions of more than 9% this year, while ADP Research Institute figures showed the U.S. lost more than 20 million jobs last month.

Most analysts don’t see demand rebounding to pre-virus levels for at least a year, with some questioning if that will ever happen. The risk of a second wave of infections in the U.S. as states reopen can’t be discounted, while deteriorating relations between Washington and Beijing may hamper the global economic recovery.

Prices:
  • West Texas Intermediate fell 5.7% to $23.16 a barrel in New York as of 9:03 a.m. local time. Prices earlier jumped 6.2%
  • Brent declined $1.04 to $29.93 a barrel in London. It had risen as high as $32.27 earlier
  • Dated Brent, a reference for two-thirds of the world’s oil flows, was at $23.83 on Tuesday, according to traders monitoring prices from S&P Global Platts

“We’ve gone on Brent from $20 to $32, that’s a lot,” said Tor Svelland, chief executive officer of commodities fund Svelland Capital. “The demand destruction is still there, it’s a very, very strong move.”

U.S. crude stockpiles rose by 8.44 million barrels last week, the American Petroleum Institute reported, according to people familiar with the data. That would be the smallest increase since the week ended March 20, if confirmed by Energy Information Administration figures due later Wednesday. Supplies at the storage hub at Cushing, Oklahoma, expanded by 2.68 million barrels, the API data showed.

More oil-market news
  • Winners from April’s market rout are starting to emerge. Hedge fund Westbeck Capital Management, which posted its best ever month in April, said the bull case for crude is now “exceptional.” Pierre Andurand’s commodities fund is up almost 70% this year after further gains last month.
  • HSBC Holdings Plc took steps to oust the management at a Singapore oil trader as Europe’s biggest bank seeks to limit potential credit losses from the sector following the collapse of Hin Leong Trading (Pte) Ltd.
  • Some shale drillers said they could restart output if prices rise above $30 a barrel.
  • Occidental Petroleum Corp. took a $1.4 billion writedown related to an investment in a pipeline affiliate, cut capital spending and withdrew its guidance for the year after the collapse in oil prices.


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