Oil prices fall on weaker demand growth, surprise gain in US crude stocks
Illustrative image Image Credit: Pixabay

London: Brent crude oil sank below $16 a barrel to its lowest since 1999 on Wednesday, before recovering slightly on the prospect of extra pledges to cut output in addition to a pact by major producers to limit supplies.

International benchmark Brent crude, which fell 24% in the previous session, touched $15.98 a barrel on Wednesday, hitting its lowest since June 1999. By 1225 GMT, it had recovered to $21.16, up $1.83 or 9.5%.

US West Texas Intermediate was up $2.26 or 20%, at $13.83.

Analysts said the price levels were now so low they would a big impact the amount of oil companies could produce without facing deep losses.

"Overall, we are at price levels which will have a strong impact on production worldwide," Olivier Jakob, oil analyst at Petromatrix, said.

Another analyst said there could be worse to come.

"Be prepared for more surprises in this broken oil market," Rystad Energy's head of oil markets Bjornar Tonhaugen said.

The prospect of supply outstripping demand for several months led to some of the most volatile oil trading in history on Monday and Tuesday.

The front-month US contract fell below zero for the first time ever ahead of its expiry on Tuesday as the prospect of taking delivery of surplus oil with nowhere to store it because capacity is full sowed panic.

Wednesday's price lows for Brent were last seen when business and consumers were concerned - unnecessarily as it turned out - about the Millennium Bug affecting computers after the turn of the century.

At the same time, OPEC was again tackling a supply glut, but then the drop in demand had been far less extreme than that triggered by the current restrictions on movement worldwide to tackle the coronavirus.

In the latest sign of excess supply, the American Petroleum Institute on Tuesday reported that U.S. crude inventories rose by 13.2 million barrels.

The US government's official supply report is due on Wednesday.

Although OPEC and allied producers, referred to as OPEC+, agreed this month to reduce output by 9.7 million bpd, starting from May, producers are already considering further steps.

Saudi Arabia on Tuesday said it was ready to take extra measures with other producers. Iraq made similar comments. The next formal OPEC+ meeting is in June.

The United States and other countries also said this month they would pump less.

But in a development that raises doubt over a formal U.S.

supply cut, two of three Texas regulators on Tuesday delayed a vote to force producers to curtail outpu