Oil falls to $30 as supply glut counters lockdown easings

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NEW YORK — Oil fell below $30 a barrel on Wednesday as U.S. crude inventories ticked up and gasoline demand remained below normal seasonal levels, offsetting hopes for a recovery in demand as some countries ease coronavirus lockdowns.

Brent crude has almost doubled since hitting a 21-year low on April 22, supported by expectations demand will recover and by a record supply cut led by the Organization of the Petroleum Exporting Countries. Still, the benchmark and its U.S. counterpart remain weighed down by tepid demand and high volumes in storage.

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Brent was down $1.32, or 4.2%, at $29.65 a barrel, having risen in the past six sessions. West Texas Intermediate (WTI) crude fell $1.20, or 4.6%, to $23.36.

U.S. crude stocks and distillate inventories rose while gasoline inventories fell, the Energy Information Administration said on Wednesday.

Crude inventories rose by 4.6 million barrels in the week to May 1 to 532.2 million barrels, compared with analysts’ expectations in a Reuters poll for a 7.8 million-barrel rise.

“That smallish crude oil build was certainly supportive, but there are still problems facing the market in this report,” said John Kilduff, a partner at Again Capital in New York. “That huge build in distillates shows that the impact from a lack of airline traffic and over the road truck traffic, so that doesn’t speak well about the economy and demand going forward.”

Gasoline demand is also below year-ago levels.

“We’re talking about normalization of supply and demand but we’ve got a long way to go,” said Lachlan Shaw, National Australia Bank’s head of commodity strategy.

Italy, Spain, Nigeria and India as well as some U.S. states began allowing some people to go back to work and opened up construction sites, parks and libraries.

Germany’s federal government and 16 states have agreed on ways to relax the lockdown.

The easing of lockdowns should lead to a recovery in global oil demand, which in April was expected to collapse by at least 20%, an unprecedented drop, as governments told people to stay at home.

To tackle the resulting glut, OPEC and its allies agreed to a record oil output cut of 9.7 million barrels per day, about 10% of pre-coronavirus demand. That reduction began on May 1.

For now though, soaring inventories are a reminder of excess supply lingering in the market.

“We would tend to agree that the market has bottomed out, but would caution against getting overly excited about this,” said analysts at JBC Energy. “The data trundling in for April really is shockingly bad.” (Additional reporting by Alex Lawler in London, Shu Zhang in Singapore, Sonali Paul in Melbourne; editing by Jason Neely/Mark Heinrich/David Gregorio)