Oil prices were mixed Thursday as traders weighed downbeat comments from the US Federal Reserve head about the coronavirus pandemic against a surprise drop in US crude reserves.
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Oil markets had a brutal April as economic activity ground to a halt worldwide because of lockdowns imposed to fight the virus, with WTI falling below zero for the first time ever.
However they ended Wednesday lower after Fed Chair Jerome Powell warned of a potentially slow economic recovery from the pandemic.
He said the economic outlook was “highly uncertain” and that Washington may need to spend even more than the trillions already approved.
Markets were given some support after data from the US Energy Information Administration showed that nationwide inventories dropped 745,000 barrels, compared with an expected increase of four million barrels.
That signalled that massive production cuts are helping reduce the glut in the market. However, the figures also showed weak processing by refineries, suggesting that consumer demand is yet to really pick up.
Prices have also been buoyed this month after top producers — comprising exporting cartel OPEC and its allies — started cutting production as part of a deal to shore up markets.
OPEC said in its monthly report released Wednesday that the rebalancing of the market was underway and will accelerate, and analysts were also upbeat.
“As economies carry on with restarting activity, albeit at a measured pace, and OPEC shows a more significant commitment to supply discipline, oil prices will show further upside momentum,” said Stephen Innes, chief global market strategist from AxiCorp.
“But momentum will happen in fits and starts.”
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