By Peter Nurse
Investing.com - Oil markets have been volatile Wednesday, with traders having to balance expectations of a larger than previously forecast hit to oil demand with the idea of extended production cuts.
At 9:20 AM ET (1320 GMT), U.S. crude futures traded 0.2% higher at $25.82 a barrel, while the international benchmark Brent contract rose 0.1% to $30.02.
The Organization of Petroleum Exporting Countries said earlier it now expects a much deeper decline in 2020 global oil demand than it forecast last month, seeing global oil demand falling by 9.07 million barrels a day this year to 90.6 million barrels, compared with 6.85 million barrels in April.
Still, OPEC’s forecasts were previously seen at the high end of market expectations, and these changes bring them roughly into line with the predictions of the International Energy Agency.
Additionally, the group of OPEC and its allies, known as OPEC+, want to maintain existing oil cuts beyond June when the group is next due to meet, four OPEC+ sources said on Tuesday, Reuters reported.
The group of oil producers agreed in April to cut output by 9.7 million barrels a day for May and June, and are set to scale back the cuts to 7.7 million barrels from July until December.
The tone within the market has also been helped by reports that Iraq, OPEC’s second-biggest producer, was to the fore in cutting supply to the prized Asian market as the global deal to curb output kicked in.
State-owned oil marketer SOMO told at least three Asian customers they won’t get the full contractual volumes they had asked for in June, with one of them getting a reduction of more than 30%, according to traders who were informed by the company, Bloomberg reported.
Saudi Arabia, the group’s biggest producer, has typically taken the brunt of any reductions the cartel has agreed upon, while Iraq has consistently produced above quota.
The official U.S. weekly oil inventories data are due later Wednesday, with crude stockpiles expected to continue their downward trend, albeit slightly.