Oil rises on news of production cuts

Oil rises on news of production cuts

Oil rises on news of production cuts

The turn lower game despite some producers like Kuwait said they would move to cut output swiftly to try to counter the evaporation in global demand for fuels caused by the coronavirus pandemic.

But barring a sharper jump on the last trading day of the week, prices are heading for their eighth weekly loss in the last nine - one of the most tumultuous weeks in the history of oil trading, with U.S. West Texas Intermediate falling into negative territory to minus $37.63 a barrel on Monday, while Brent thudded to a two-decade low.

Brent crude, which fell 24% in the previous session, touched $15.98 a barrel, its lowest since June 1999.

Since the start of the year, Brent has fallen more than 65%, while WTI has dropped around 75%.

Oil trading has been more volatile than ever in recent days on prospects that a historic supply glut will swell even further as coronavirus lockdowns slash demand for fuel.

The Organisation of the Petroleum Exporting Countries and other oil producing nations, a grouping known as Opec+, agreed this month to cut output by a record 9.7 million barrels per day, around 10pc of global supply, to support oil prices, but prices continued to decline.

"WTI's dive into negative territory has highlighted just how weak demand for crude oil now is, and it is a stark warning to oil-producing countries and companies around the world". Rystad Energy cut its forecast for oil demand in 2020 to 89.2 million bpd, a 10 percent decline from 2019.

Russian Federation is looking for options to cut its production and may go as far as burning its own oil, sources said.

There were also signs U.S. output is beginning to fall - the Energy Information Administration said American crude production fell slightly to 12.2 million barrels per day last week. Its production has not changed much from March until now.

The Gulf is a major gateway for oil to reach worldwide markets, and spikes in US-Iran tensions typically drive prices higher.

After President Donald Trump ordered the US Navy to destroy any Iranian boats that harass American ships in the Gulf, the Islamic Republic's Revolutionary Guards warned Thursday of a "decisive response".

The head of Iran's Islamic Revolutionary Guard Corps said Tehran will destroy U.S. warships if its security is threatened in the Gulf.

"However, given the glut we have in the oil market, it is hard to see this offering lasting support to the market, unless the situation does escalate further".

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