Oil prices fell about 2% on Wednesday as fresh lockdowns in Europe stoked fuel consumption fears and a pessimistic demand outlook from OPEC and its allies ahead of their meeting to decide on production curbs.
Brent crude for May, which expired on Wednesday, settled at $63.54 a barrel, down 60 cents, or 0.9%. The more active contract for June ended $1.43, or 2.2%, lower at $62.74.
U.S. West Texas Intermediate (WTI) crude futures closed at $59.16 a barrel, losing $1.39, or 2.3%.
Brent was down 3.9% for the month and up 22.6% for the three months ended March 31. WTI fell 3.8% in March and rose 21.9% for the quarter.
“That was about the time the market tanked,” said Bob Yawger, director of energy futures at Mizuho Securities. “They cannot get their act together with controlling the virus or getting some kind of vaccine program together.”
A downward revision of OPEC+ oil demand growth forecast for this year by 300,000 barrels per day (bpd) also weighed on prices. The Organization of the Petroleum Exporting Countries and allies, together called OPEC+, are set to meet on Thursday, to decide on output policy.
“Given this pessimistic outlook, it seems likely that the production quotas will be left in place for another month,” said Commerzbank analyst Eugen Weinberg.
On Wednesday, the Joint Technical Committee, which advises the group of oil-producing nations that includes Saudi Arabia and Russia made no formal recommendation, three OPEC+ sources said. Options, which the ministers are set to consider on Thursday, include an output roll-over and a gradual increase, two OPEC+ sources said.
OPEC+ are currently curbing output by just over 7 million bpd in a bid to support prices and reduce oversupply. Saudi Arabia has added to those cuts with an additional 1 million bpd.
“The oil market is still playing a guessing game today as to what supply policy OPEC+ will set out at tomorrow’s meeting, but the $64 per barrel Brent price signals that traders expect a cautious approach from the alliance,” said Rystad Energy’s analyst Louise Dickson.
Limiting the price fall, U.S. crude stocks fell unexpectedly last week as refinery runs increased, shrinking by 876,000 barrels in the last week, compared with analysts’ expectations for an increase of 107,000 barrels, the Energy Information Administration said. [EIA/S]
Also, crude output in the United States, the world’s top producer, slipped to 11.1 million bpd in January, according to the latest monthly data, and remained 13.1% lower than year-ago levels.