Oil prices were mixed on Friday after the weakest Chinese economic data in decades showed the effect of the coronavirus pandemic, offsetting some earlier gains on optimism for United States President Donald Trump’s early plans to revive the US economy.
Brent crude futures were up by 55 cents, or 2 percent, at $28.37 a barrel by 04:06 GMT, while the US crude contract for May delivery, which expires on April 21, was down 13 cents, or 0.7 percent, at $19.74 a barrel. The more active June contract was up $1, or 4 percent, at $26.53.
China’s economy shrank in the first quarter for the first time since at least 1992, as the coronavirus outbreak paralysed production and spending and punched a huge hole in global demand for crude and refined products.
That data was released after Trump laid out a three-stage process for ending lockdowns to stop the spread of the coronavirus that has now killed more than 32,000 Americans and nearly 140,000 worldwide.
“Oil markets found baseline support from President Trump’s US reopening plan,” said Stephen Innes, market strategist at AxiTrader. Still, downside risk remains the dominant factor, he said.
Both oil benchmarks are heading for a second consecutive week of losses, with US oil around 18-year lows: Analysts have slashed forecasts for prices and demand due to the spread of the coronavirus and oversupply concerns.
The Organization of the Petroleum Exporting Countries (OPEC) lowered its forecast for 2020 global oil demand and warned it may not be the last revision downward. OPEC now sees a contraction of global demand of 6.9 million barrels per day (bpd), compared with a small increase predicted last month, due to the coronavirus outbreak.
“Downward risks remain significant, suggesting the possibility of further adjustments, especially in the second quarter,” OPEC said of the demand forecast.
OPEC and other producers including Russia, in a grouping known as OPEC+, over the weekend agreed on production cuts of nearly 10 million bpd, after an earlier cooperation agreement collapsed.
Oil company ConocoPhillips said on Thursday it will reduce planned North American output by 225,000 bpd, the largest cut so far by a key shale oil producer to deal with the unprecedented drop in demand.
“This highlights that the market will see meaningful cuts from outside the OPEC+ group without the need for mandated cuts,” said ING bank in a note on Friday. “Instead, market forces will do the job, with the low price environment forcing producers to cut back.”
Still, even allowing for another 10 million bpd of cuts supposed to come from producers like the United States and Norway due to weak prices, there is still a mismatch between supply and demand of about 10 million bpd, most analysts say.
“The latest market response suggests that the output cuts are having limited effect other than to perhaps stall an inevitable moment of reckoning when stocks exceed capacity and tanks overflow,” John Driscoll, chief strategist for JTD Energy Services Pte in Singapore told Bloomberg news agency. “The cuts are not enough.”
Data released on Friday by China’s National Bureau of Statistics showed the country’s daily refining activity fell to a 15-month low in March as the country struggled with the economic effects of the pandemic. Crude runs over the period came in at 149.28 million tonnes, or about 11.98 million bpd, down 4.6 percent from a year earlier. China is one of the world’s biggest consumers of crude oil.