Oil prices drop as demand declines, markets pin hope on US stimulus

Oil prices slid on Thursday after three days of consecutive gains, despite risks of rapid decline in demand caused by travel cancellations and lockdowns amid the coronavirus pandemic. However, markets pin their hope on the $2 trillion US emergency stimulus to support economic activity.

Brent crude futures was down 0.7% or 19 cents, at $27.20 per barrel. West Texas Intermediate crude futures dropped 1.5% or 37 cents, at $24.12 per barrel. The two contracts are down by approximately 60% this year.

The US Senate backed the stimulus package to be launched to aid unemployment and affected industries during the pandemic.

But the outlook for oil remains gloomy as demand declines while supply increases, caused by a failed supply-cut pact by OPEC+ and a plan by Saudi Arabia to ship over 10 million barrels per day from May.

Global oil demand is expected to fall by more than 14 million bpd in the second quarter, according to the IHS Market. Meanwhile, oil companies and traders worldwide have been struggling to park unwanted crude. 

JBC Energy in Vienna estimated global oil demand to drop by a larger 15.3 million bpd in the second quarter, likely causing benchmark prices to fall at $10 temporarily.

US crude inventories climbed by 1.6 million bpd in the recent week, on its ninth week of consecutive gains, according to the Energy Information Administration.