U.S. West Texas Intermediate crude oil futures are up for a third straight session on Friday as major producers began output cuts to offset a slump in fuel demand triggered by the coronavirus pandemic while data showed U.S. crude inventories grew less than expected.
Futures are now within striking distance of the close on April 20 which is the day before the steep drop that saw nearby May futures plunging into negative territory for the first time in history. This move would diminish the impact of last week’s historical break in crude oil, while giving it the appearance of capitulation.
OPEC+ Production Cuts Begin
Reflecting the output cuts agreed between OPEC and other major producers like Russia, a grouping known as OPEC+, the imbalance between oil supply and demand is set to be halved to 13.6 million barrels per day (bpd) in May, and drop further to 6.1 million bpd in June, according to Rystad Energy.
US Firms Cutting Production
Traders are saying production cuts of almost 10 million bpd by OPEC and its allies or about 10% of global production, due to take effect from May 1, are not going to have that much of an impact on prices without the United States curbing its own output.
While storage is rapidly filling up, production cuts by U.S. shale producers, estimated by consultants Rystad Energy at 300,000 barrels per day (bpd) for May and June, should help slow flows into tanks.
Additionally, regulators in the U.S. state of…