Oil anchored near $24 on lingering concerns about global glut

Oil was anchored near $24 a barrel after halting a five-day rally as investors weigh a huge glut that’s testing global storage capacity limits against small signs of recovering demand.

Futures fell 1.5 per cent in New York after losing 2.3 per cent on Wednesday. US crude stockpiles rose for a 15th week, although at a slower pace, while supplies at the Cushing storage hub expanded, according to government data.

American gasoline consumption on a four-week basis rebounded at its strongest rate on record last week but remained far below the seasonal average.

The OPEC+ coalition that includes Saudi Arabia and Russia started implementing daily output cuts of almost 10 million barrels a day on May 1, while in the US – the world’s biggest producer – prominent shale explorers and companies such as Chevron Corp. have flagged supply curbs. While there are signs of returning demand, most analysts don’t see a rebound to pre-virus levels for at least a year, with some questioning if that will ever happen.

In American states that have loosened coronavirus lockdowns, fuel demand is picking up, with parts of Florida reporting gasoline consumption is down just 25-30 per cent, from 50 per cent previously. Refiner Delek US Holdings Inc. said on Wednesday it’s seeing demand improve in rural areas of Texas and Arkansas.

“The market has become bipolar, caught between optimism and pessimism over the supply-demand gap narrowing,” said Vandana Hari, founder of Vanda Insights. “I would expect continuing volatility in the coming days.”

Prices
– West Texas Intermediate for June delivery fell 37 cents to $23.62 a barrel on the New York Mercantile Exchange as of 7.55am London time after gaining as much as 4.2 per cent earlier
– Brent for July settlement declined 1 per cent to $29.43 after losing $1.25 on Wednesday

US crude stockpiles expanded by 4.59 million barrels last week, according to Energy Information Administration data on Wednesday. Inventories at Cushing, Oklahoma, the delivery-point for WTI, rose by 2.07 million barrels to 65.4 million. Gasoline supplies fell for a second week.

Saudi Aramco delayed the release of its key monthly pricing for June crude exports for a second time, according to people with knowledge of the matter. The state oil producer had already delayed the announcement to Wednesday from Tuesday.