Oil steadies after hitting lowest this century on coronavirus crisis

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LONDON (Reuters) – Oil recovered some ground on Wednesday after slumping below $16 a barrel to its lowest since 1999, but prices remained near two-decade lows with the market awash with crude due to the economic fallout from the coronavirus pandemic.

FILE PHOTO: A muddy run-off splashes beside an oil rig belonging to Zion Oil and Gas in Karkur, northern Israel October 17, 2010. ISRAEL-GAS/ REUTERS/Nir Elias/File Photo

A glut has been building since OPEC+, a group led by Saudi Arabia and Russia, failed to renew output cuts in March. This month, OPEC+ agreed new curbs but global measures to prevent the virus spreading have driven demand down even more steeply.

Producers are now considering whether to take further steps.

Brent crude LCOc1, which fell 24% in the previous session, touched $15.98 a barrel on Wednesday, hitting its lowest since June 1999. By 1120 GMT, it had recovered to trade unchanged on the day at $19.33 but still a third of its December level.

U.S. West Texas Intermediate CLc1 was down 25 cents, or 2.2%, at $11.32.

“The sell-off that has been triggered in the Brent prices today is highly likely to put more pressure on OPEC+ to cut the oil production more,” said Avatrade analyst Naeem Aslam.

“The world is still very much dependent on oil, and once we are through this storm the demand will pick up,” he said.

However, the prospect of supply outstripping demand for several months, at least, led to two of the wildest oil trading days in history this week. The nearby U.S. contract fell into negative territory for the first time ever on Monday.

“Be prepared for more surprises in this broken oil market,” said Rystad Energy’s head of oil markets, Bjornar Tonhaugen.

Wednesday’s low for Brent took prices back to a time when OPEC was also tackling a supply glut and business and consumers were concerned – unnecessarily as it turned out – about the Millenium Bug affecting computers after the turn of the century.

In the latest sign of excess supply, the American Petroleum Institute on Tuesday reported that U.S. crude inventories rose by 13.2 million barrels.

The U.S. government’s official supply report is due later on Wednesday.

Although OPEC+ agreed this month to reduce output by 9.7 million bpd, starting from May, producers are already considering further steps.

Saudi Arabia on Tuesday said it was ready to take extra measures with other producers. Iraq made similar comments, although the next formal OPEC+ meeting is in June.

The United States and other nations also said this month they would pump less, bolstering efforts by OPEC+.

But in a development that raises doubt over a formal U.S. supply cut, two of three Texas regulators on Tuesday delayed a vote to force producers to curtail output.

Reporting by Aaron Sheldrick; Editing by David Goodman

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