Oil on Friday edged lower for the week after paring losses following a dramatic collapse on Monday that saw prices in New York plunge below zero for the first time in history.
West Texas Intermediate for June delivery on Friday rose 2.7 percent to US$16.94 per barrel, closing the curtain on a tumultuous week of wild price swings.
US operators have started to shut old wells and halt new drilling, actions that could reduce output by 20 percent.
Brent crude, the international standard, rose 0.5 percent to US$21.44 per barrel.
Russia’s seaborne exports from the Baltic are to fall to a 10-year low next month, while Kuwait and Algeria said that they are reducing production earlier than required under an OPEC+ deal.
“The production cuts are helping sentiment,” Commodity Research Group senior partner Andrew Lebow said. “We have a long way to go to balance the market. Traders are still very concerned about the storage situation.”
Oil exploration across the US fell the most in 14 years, with drillers idling 60 rigs, Baker Hughes Co data showed.
It was the sixth straight week of decreased activity levels, halting almost half of US exploration.
“Rig counts are a drop in the bucket,” New York-based Tyche Capital Advisors LLC commodity fund manager Tariq Zahir said. “Demand has to come back and until you see that it’s going to be a very hard argument to say why crude oil should massively go higher.”
Still, a massive glut remains and it would not clear quickly, consultant FGE said, deepening its forecast for demand loss yet again.
In a sign of how severe the supply imbalance is, traders are using barges — usually busy moving fuels between Europe’s petroleum-trading hubs — as cargo storage instead.
Meanwhile, a US pipeline operator is looking at ways to free up space on its conduits to stock more crude.
With no clear indication of when demand might recover, the market is set for a prolonged slump that will reshape the industry for years to come.
Oil’s collapse would be followed by the weakest recovery in history, the World Bank said.
“There are only two things that can save the market from its current anguish: a recovery in demand or additional supply cuts,” PVM Oil Associates analyst Stephen Brennock said. “Tumultuous, erratic and unprecedented — the curtain is about to fall on a historic week for the oil market.”
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