posted May 14, 2020 at 04:30
pm by AFP
Oil
prices edged higher Thursday on signs that production cuts are easing a
virus-triggered glut, but gains were capped after the head of the Federal
Reserve warned about the pandemic's economic impact.
US
benchmark West Texas Intermediate rose 1.2 percent to $25.60 a barrel
while international marker Brent put on 0.5 percent to $29.33 a barrel,
after both contracts fell a day earlier.
Crude
markets had a brutal April as demand collapsed because of lockdowns imposed to
fight the virus, with WTI falling below zero for the first time ever.
But they
started rallying this month as major economies began to loosen curbs as easing
infection and death rates raised hopes that the worst of the pandemic had
passed.
On
Wednesday, data from the US Energy Information Administration showed
inventories in the world's top economy dropped 745,000 barrels, compared with
an expected increase of four million barrels.
That
suggested massive production cuts are helping reduce the glut in the market,
analysts said.
Top
producers, comprising exporting cartel OPEC and its allies, started cutting
production by almost 10 million barrels a day this month to boost prices.
However,
the US figures also showed weak processing by refineries, suggesting consumer
demand is yet to really pick up.
Meanwhile,
OPEC said in its monthly report that the rebalancing of the market was underway
and will accelerate.
But gains
were limited after Fed boss Jerome Powell's warning of a slow economic recovery
from the pandemic, which has also pushed stock prices lower.
He said
the economic outlook was "highly uncertain" and that Washington may
need to spend even more than the trillions already approved by lawmakers.
Analysts
were nevertheless optimistic that oil prices would continue to recover.
"As
economies carry on with restarting activity, albeit at a measured pace, and
OPEC shows a more significant commitment to supply discipline, oil prices will
show further upside momentum," said Stephen Innes, chief global market
strategist from AxiCorp.
"But
momentum will happen in fits and starts."
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