US oil weekly stockpile dipped for the first time in 16 weeks. That was not enough to fuel more optimism, as demand side confusion keeps resurfacing week after week. Barring the historic April 20 madness, the oil price has largely stayed range bound – as Brent is struggling to break the $30/bbl barrier. The two leading producers, Saudi Arabia and Russia, are fueling less oil and more rumors in the market to bring about a semblance of balance.
Earlier this week, Russia and the Kingdom issued a joint statement hinting at an earlier than expected demand recovery and praising the recent surge in demand. At the same time, KSA was seen given mix signals by hinting at further production cut agreements by all Opec Plus members, even after the unprecedented freeze deal.
This goes on to show it is not all smooth sailing. Granted, the jitters of an overflowing storage capacity are settled as supertankers are doing the job, and some restrictions in lockdown around the globe have fueled hopes of demand resurrection. But Opec sees more doom, as the latest oil demand projection hints at global oil demand to go down by 9 million barrels – higher by a third from the earlier projection last month.
KSA has also hinted at reducing the output by a further million barrels a day in addition to the agreed upon cuts. The market balancing would still need another 7-8 million barrels shaved pretty soon, which is increasingly unlikely to happen. Much will depend on how the countries around the world react to reopening, and if the second wave of the virus comes and is close to as big as the ongoing one.