Oil prices continued sliding today. Both oil benchmarks are heading for a second consecutive week of losses, with U.S. oil around 18-year lows. US crude oil price was down nearly 20 per cent for the week and again flirting with its biggest low since 2002. While Brent oil was down 11 per cent since Monday.
Reasons why the oil price trading in a bearish zone even after OPEC record production cut.
OPEC lowers oil demand forecast
The Organization of the Petroleum Exporting Countries (OPEC) lowered its forecast for 2020 global oil demand. The OPEC now expects global demand to contract by 6.9 million barrels per day or 6.9%, in 2020, it said in a monthly report. Much of this fall in demand has been due to the falling demand in transportation, gasoline and jet fuels.
Crude stockpiles rose by a record 19.2 million
According to the EIA, crude stockpiles in the US increased by 19.2 million barrels during the previous week, far higher than the economists’ forecast for a rise by 11.6 million barrels. The International Energy Agency warned of a record drop in crude demand this year due to the COVID-19 pandemic.
Unconvinced OPEC production cuts
The investors are unconvinced that record supply cuts especially the actual production cut came in at 9.7 million barrels per day and the oil traders and investors were expecting 10 million barrel per day cut.
There have been rumours out further cuts by members of OPEC and its partners. Saudi Arabia Energy Minister Abdulaziz bin Salman Al Saud and his Russian counterpart Alexander Novak held a phone call on Thursday and issued a joint statement emphasizing their commitment to stabilizing the oil market, according to the OPEC website.