Oil slides towards US$25 on oversupply fears

London

OIL fell towards US$25 a barrel on Wednesday, within sight of its lowest in 18 years, as a report showing a big rise in US inventories and a widening rift within Opec heightened oversupply concerns.

Pledges of higher output from Saudi Arabia and Russia after a supply pact collapsed and a slide in demand due to the coronavirus outbreak have hammered the market. Global benchmark Brent crude fell 66 per cent in the first three months of 2020 in its biggest ever quarterly loss. As of 1217 GMT, June Brent was down 94 cents, or 3.6 per cent, at US$25.41. US West Texas Intermediate crude for May was down 11 cents at US$20.37. Brent fell to US$21.65 on Monday, the lowest since 2002, when the now-expired May contract was the front month.

"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."

Underlining supply glut fears, the American Petroleum Institute, an industry group, reported US crude inventories rose by 10.5 million barrels, far exceeding forecasts for a fourmillion barrel increase.

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The bearish mood was also fuelled by a rift within the Organization of the Petroleum Exporting Countries. Saudi Arabia and other Opec members have not agreed to hold 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. REUTERS