By Peter Nurse
Investing.com - Oil markets fell back Wednesday, as fresh evidence of the demand destruction caused by the coronavirus pandemic triggered a bout of profit-taking.
At :9:20 AM ET (1320 GMT), U.S. crude futures traded 3.7% lower at $23.68 a barrel, while the international benchmark Brent contract fell 2.5% to $30.17.
The U.S. private sector shed just over 20 million jobs in March, according to a report by payrolls processor ADP (NASDAQ:ADP), as measures to contain the coronavirus pandemic devastated the country's economy.
“Job losses of this scale are unprecedented. The total number of job losses for the month of April alone was more than double the total jobs lost during the Great Recession,” said Ahu Yildirmaz, co-head of the ADP Research Institute.
This release punctured the recent bout of optimism prompted by the beginning of the agreed reduction in oil output of 9.7 million barrels a day by the Organization of Petroleum Exporting Countries and its allies.
"We are now focused on the full and timely implementation of this historic agreement," said OPEC's Secretary General Mohammad Barkindo, while declining to discuss individual country compliance.
OPEC Gulf states, including Saudi Arabia, Kuwait and the United Arab Emirates, have informed their customers of cuts to exports, with Iraq looking like the main laggard. Additionally, Russia’s oil production declined by 16% to around 9.5 million barrels per day in the first week of May, according to Interfax.
On top of this, there has been ample evidence of U.S. drillers reducing output in the country’s biggest shale fields as these price levels make production uneconomic.
The cutbacks are easing fears that the world will run out of storage space for crude and fuels, reducing the chances of a repeat of last month’s plunge below zero as the front-month contract nears expiry.
That said, U.S. crude stockpiles still rose by 8.44 million barrels last week, the American Petroleum Institute reported, according to people familiar with the data. While this would be the smallest increase since the week through March 20, if confirmed by Energy Information Administration figures due Wednesday, it still represents an increase in oil needing to be stored.