Oil. Picture: REUTERS
Oil. Picture: REUTERS

London — Oil prices climbed on Thursday after an unexpected drop in US crude stocks, but the Brent benchmark still hovered below $30 a barrel as any bullish momentum continued to be curbed by a bleak fuel demand picture due to the coronavirus pandemic.

Brent crude futures were up US51c, or 1.8%, at $29.70 a barrel at 7.55am GMT. US West Texas Intermediate (WTI) crude futures were up US54c, or 2.1%, at $25.83 a barrel.

Prices have ticked up in the past two weeks as some countries relaxed coronavirus restrictions and lockdowns to allow factories and shops to reopen.

However, the emergence of new cases in South Korea and China has raised concerns over a possible second wave of infections that would weigh on economic recovery and fuel demand.

US Federal Reserve chair Jerome Powell warned on Wednesday of an “extended period” of weak economic growth and called for additional fiscal spending to deal with the fallout from the virus.

Providing bullish impetus, US crude inventories fell for the first time in 15 weeks.

US crude stockpiles were drawn down by 745,000 barrels to 531.5-million barrels in the week to May 8, the Energy Information Administration said on Wednesday. But any respite is expected to be short-lived. Goldman Sachs raised its May global demand estimate by 1.4-million barrels per day (bpd), but still sees a decline of 16-million bpd from pre-Covid levels.

The bank said recovering demand and lower output would push the global oil market into deficit in June. However, it maintained its summer price forecasts of $30 a barrel for Brent and $28 a barrel for WTI. Opec said on Wednesday it expects 2020 global oil demand to shrink by 9.07-million bpd, a deeper contraction than its previous forecast of 6.85-million bpd.

It said it also expected the second quarter to see the steepest decline in demand.

ING Economics said in a note the lowering of demand forecasts made for “bearish reading”.

“(Second-quarter) demand for Opec oil is just 16.77-million bpd, well below Opec output levels, even when full compliance of Opec+ cuts are taken into consideration,” ING said.