Oil prices fell on Friday, giving up early gains as China’s worst economic contraction on record outweighed news of U.S. President Donald Trump’s plans to get the American economy moving again.
Brent was down by 10 cents, or 0.4%, at $27.72 a barrel by 0815 GMT while U.S. crude for May delivery tumbled by $1.54, or 7.8%, to $18.33. The more active June contract was down 3 cents, or 0.1%, at $25.50.
The extent of the U.S. decline was attributable to the imminent expiry of the May contract, on April 21, and fast-filling crude storage. The more active June contract for U.S. crude was down only 3 cents, or 0.1%, at $25.50.
“The market knows that U.S. crude stocks will fill very rapidly ... as refinery runs continue to be cut tremendously,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy.
The hobbling of China’s economy, meanwhile, was highlighted by data showing that GDP shrank 6.8% year on year in the first three months of this year, the first such decline since quarterly records began in 1992.
That data was released after President Trump laid out a three-stage process for ending U.S. lockdowns.
“The enthusiasm about U.S. President Trump’s intention to end the country’s lockdown seems to be dying down as traders realise that a full return of the economy will not come overnight,” Tonhaugen said.
Brent rose more than $1 earlier in the session, also boosted by a report detailing encouraging partial data from trials of U.S. company Gilead Sciences’ experimental drug remdesivir in severe COVID-19 patients.
Both oil benchmarks are heading for a second consecutive week of losses, with U.S. oil prices around 18-year lows.
China’s daily crude oil throughput in March sank to a 15-month low, with state refiners maintaining deep output cuts, but there are some signs of recovery as the country begins to ease coronavirus containment measures.
“If more of the global economy enacts plans to reopen and restores some sense of normality, that could help oil prices find a firmer floor in May, aided by the OPEC+ supply cuts kicking in,” said Han Tan, market analyst at FXTM.
The Organization of the Petroleum Exporting Countries (OPEC) and producers including Russia, a grouping known as OPEC+, last weekend agreed on production cuts of nearly 10 million bpd, after an earlier oil supply pact collapsed.
ConocoPhillips on Thursday said that it will reduce planned North American output by 225,000 bpd, the largest cut so far by a major 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,” ING bank said in a note on Friday.
“Instead, market forces will do the job, with the low-price environment forcing producers to cut back.”