Oil bounces back as rising stockpiles seen pointing to lower output amid coronavirus

TOKYO, April 16 (Reuters) - Oil rose on Thursday, with U.S.
crude rebounding from near-20-year lows in the previous session
on hopes that a big build-up in U.S. inventories may mean
producers have little option but to deepen output cuts as the
coronavirus pandemic ravages demand.
Brent crude LCOc1 was up 69 cents, or 2.5%, at $28.38 a
barrel by 0102 GMT. U.S. West Texas Intermediate (WTI) was up 56
cents, or 2.8%, at $20.43.
With official data showing U.S. inventories surging the most
on record, WTI fell on Wednesday to its lowest since February
2002, with Brent slumping more than 6%. EIA/S
The figures followed a report from the International Energy
Agency (IEA) that forecast oil demand would fall by 29 million
barrels per day (bpd) in April, to the lowest in 25 years, and
just below 30% of global demand before the coronavirus outbreak.
IEA/M
That number is well above production cuts in the pipeline.
The Organization of the Petroleum Exporting Countries (OPEC) and
allied producers including Russia, a grouping known OPEC+, have
agreed to reduce output by 9.7 million bpd, while hoped-for cuts
of another 10 million bpd from other countries including the
United States could lower production by 20 million bpd.
"The massive storage build, as counterintuitive as it
sounds, did provide some price support as the build foreshadows
that more wellhead closures are just around the corner, which
effectively trims U.S. supply," said Stephen Innes, chief global
markets strategist at AxiCorp.
Last week, the U.S. Energy Information Administration said
U.S. production is expected to slump by 470,000 bpd.
Some countries have also committed to increasing purchases
of oil for their strategic stockpiles, but there are physical
limits to how much oil can be bought.
The "use of strategic petroleum reserves in China, India,
South Korea, and the U.S. could add about 200 million barrels of
temporary storage, but this only buys a few months of wiggle
room," said Innes.
Further cuts to production will be required "to avoid
another collapse in oil prices," he said.