Oil futures: Prices settle about 4% lower on demand cuts, output increases

Oil futures prices settled about 4% lower Wednesday as the odds of a resurrected OPEC+ production cut agreement appeared reduced and demand forecasts were slashed.

The NYMEX April light sweet crude contract settled at $32.98/b, down $1.38 from Tuesday's settle, while May ICE Brent crude futures settled at $35.79/b, down $1.43.

"Oil tried to hold out hope for a rally, but dipped when stocks dipped into bear market territory," said Phil Flynn, a senior market analyst with the PRICE Futures Group.

Futures prices settled about 10% higher on Tuesday after a historic decline on Monday following the collapse of the OPEC+ agreement. On Monday, the front-month NYMEX contract settled at $31.13/b Monday, down $10.15 or 25% day on day, while ICE front-month Brent settled at $34.36/b, down $10.91, or 24%

"Oil prices appear poised to make a return towards this week's crash low as oversupply concerns will go nowhere anytime soon as the Saudis, Russians, and UAE scramble to win market share," Edward Moya, senior market analyst with OANDA, said in a note. "The oil rebound over the past 24 hours was overdone and the next question on everyone's mind should be when will prices retest Monday's low."

In its Short-Term Energy Outlook Wednesday, the US Energy Information Administration forecast WTI spot prices to average $38.19/b and Brent to average $43.30/b in 2020, down nearly $18 from last month's forecast. EIA projects that WTI spot prices will average $30/b in both April and May, which would be the lowest average for two consecutive months since September and October 2003 when prices averaged $28.03/b and $30.34/b, respectively.

Refined products also settled lower Wednesday. NYMEX front-month ULSD settled at $1.238/gal, down 1.19 cents, while NYMEX RBOB settled at $1.1103/gal, down 4.68 cents.

EIA reported Wednesday that US crude production average 13 million b/d last week, just 100,000 b/d off the prior week's record, and net crude inputs flat at 15.7 million b/d, likely pushing US crude inventories up 7.66 million barrels last week to 451.8 million barrels.

While EIA said it now expects US oil output to peak next month, global producers, now unrestrained by OPEC+, appear eager to boost output in a battle for market share in spite of the severe impact the coronavirus is having on demand.

OPEC said Wednesday it oil demand to increase by 60,000 b/d rise in global demand in 2020, 920,000 b/d less than it forecast last month. EIA on Wednesday cut another 660,000 b/d off its outlook for 2020 global oil demand growth, now predicting growth of 370,000 b/d from 2019. This is down from 1.34 million b/d in its January.

The International Energy on Monday forecast a decline in global demand for 2020 of 90,000 b/d. This would be the first contraction in consumption since the financial crisis in 2009.

While EIA forecasts US oil output to peak in April at 13.21 million b/d, Saudi Aramco said it plans to bring 12.3 million b/d into the market, after producing 9.68 million b/d, according to secondary sources.

The UAE, which said it would supply 4 million b/d to the market, produced 3.04 million b/d in February, according to secondary sources.

Russia has said it could raise its output by 200,000 to 300,000 b/d in the short-term.

(Corrects date in the lead to 'Wednesday')