Oil price remains unstable as API reports another week of supply increases

Oil was mixed on Wednesday morning in Asia after the American Petroleum Institute (API) predicted another week of increases in crude oil supply.

The American Petroleum Institute (API) estimated a 7.58-million-barrel increase in US crude oil inventories for the week ending May 8 overnight. Analyst forecasts prepared by Investing.com predicted a 5-million-barrel increase.

Brent oil futures gained 0.10% to $29.47 by 9:40 PM ET (2:40 AM GMT) and WTI futures were down 1.55% to $25.38.

WTI futures jumped 6.8% during the last session after Saudi Arabia announced a further 1 million bpd cut to production in June on top of its cuts agreed to with <a href=’https://staging.theenergyyear.com/companies-institutions/opec/’>OPEC+ in early April.

The announcement prompted Kuwait and the United Arab Emirates to pledge a further 180,000 bpd cut in production.

But the sudden announcement led some investors to question the motives for the further cuts.

“It was so sudden and so significant, it was just seen as: ‘Is this a proactive policy or just a reaction to weak demand?’” Vivek Dhar, Commonwealth Bank’s mining and energy economist, told CNBC.

Although the increase was smaller than last week’s figure of 8.4 million barrels, the API data left investors wondering if the cuts are enough to avoid the inevitable oversupply as storage space rapidly runs out.

Investors will be monitoring the new outbreak of COVID-19 virus cases in China and South Korea, with a second wave threatening to destroy the fragile demand that was slowly creeping back up as countries loosened lockdowns and social distancing measures.

Commonwealth Bank’s Dhar added, “On the demand side there’s probably a view that the worst may be behind us, in terms of the peak damage point. If we do see a second wave, that would hurt demand and hurt pricing.”

As the WTI June contract edges closer to its expiry date on May 19, investors will be monitoring the black liquid and hoping to avoid another dip into negative territory.

By Investing.com: https://www.investing.com/news/commodities-news/oil-mixed-as-api-reports-another-week-of-supply-increases-2170267