Oil extends losses on supply overhang, weak outlookOil extends losses on supply overhang, weak outlook
FILE PHOTO: Pump jacks operate at sunset in Midland

By Aaron Sheldrick

TOKYO (Reuters) – Oil prices extended losses on Thursday as the industry grappled with the growing global surplus of crude and the sharp coronavirus-led downturn in demand, with the outlook still grim despite April data showing a rise in imports into China.

Brent crude was down by 24 cents, or 0.8%, to $29.48 a barrel by 0649 GMT, after dropping 4% on Wednesday.

U.S. West Texas Intermediate futures dropped 34 cents, or 1.4%, to $23.65 a barrel, having declined more than 2% in the previous session.

Both contracts flicked higher and lower through the Asian session in light trade, with some markets including Singapore on holiday.

While prices have risen since late April as some countries have started easing lockdowns put in place to combat the worst pandemic in a century, the continued pumping of oil into storage has resulted in a stark mismatch between demand and supply.

“A shift in market sentiment was lifting prices earlier this week, but the physical overhang does not want go away just yet,” Citi Research said.

Oil prices received some support from data showing Chinese crude imports rose last month. Imports climbed to 10.42 million barrels day (bpd) in April from 9.68 million bpd in March, according to Reuters calculations based on customs data for the first four months of 2020.

Overall exports from China also rose against expectations of a sharp drop, though a big drop in total imports suggested any recovery is some way off as economies around the world fall into recession, meaning demand for fuels will likely remain subdued at best.

“Oil prices should eventually settle on a wide $10 range, with WTI crude’s upper boundary being around the $30 a barrel level, while Brent crude targets the $35 a barrel level,” said Edward Moya, senior market analyst at OANDA.

U.S. crude inventories were up for a 15th straight week last week, rising by 4.6 million barrels, the Energy Information Administration said on Wednesday.

That was less than analysts had forecast in a Reuters poll, which suggested a 7.8 million-barrel rise, but the gain highlighted once again how much supply is being stored. Distillate inventories also rose sharply.

Gasoline stocks, however, fell for a second week as some U.S. states eased lockdowns that had sharply hit traffic.

Also weighing on prices were indications that Iraq, OPEC’s second-largest producer after Saudi Arabia, has not yet informed customers of impending restrictions on its oil exports.

The Organization of the Petroleum Exporting Countries (OPEC) and allied producers – a grouping known as OPEC+ – agreed to cut production from May 1 by around 10 million bpd to stabilise prices amid the plunge in demand in economies ravaged by the coronavirus outbreak.

(Reporting by Aaron Sheldrick; Editing by Kenneth Maxwell, Christian Schmollinger & Shri Navaratnam)