Oil was anchored near $20 a barrel as concerns over virus-led demand destruction outweighed an agreement by the world’s biggest producers to curb supply. Futures rose Thursday but remained near their lowest closing level in 18 years, and there are signs that stockpiles are growing globally. U.S. crude inventories ballooned by a record 19.2 million barrels last week. In a key European hub, they jumped by the most in a year, while fuel reserves in Singapore are the highest since August 2016. The glut is looking so severe that the Trump administration is considering paying American companies to leave crude in the ground.
The stockbuilds come as consumption falls off a cliff amid lockdowns globally to curb the spread of the coronavirus outbreak. The International Energy Agency said Wednesday that output cuts by OPEC+ won’t counter the drop off in demand, adding that 2020 may come to be known as the worst year in the history of the oil market. All the while physical oil prices, particularly in Europe, are trading far below those of futures.
“What will be the most important determinant for oil markets in the short term is how quickly governments relax social distancing measures,” boosting consumption, said Rystad Energy AS’s head of analysis Bjornar Tonhaugen.