With official data showing U.S. inventories surging the most on record, WTI fell on Wednesday to its lowest since February 2002, with Brent slumping more than 6%.
U.S. West Texas Intermediate (WTI) was up 10 cents, or 0.5%, at $20.27.
Brent crude was up 3 cents, or 0.05%, at $27.92 a barrel.
Concerns about crumbling demand kept a lid on gains with both contracts having traded over 2.5% higher earlier in the session.
Energy Information Administration data also showed large U.S. refined fuels stock builds despite refiners operating at 69% of capacity nationwide, the lowest since September 2008.
“The massive storage build, as counterintuitive as it sounds, did provide some price support as the build foreshadows that more wellhead closures are just around the corner, which effectively trims U.S. supply,” said Stephen Innes, chief global markets strategist at AxiCorp.
The figures followed a report from the International Energy Agency (IEA) that forecast oil demand would fall by 29 million barrels per day (bpd) in April, to the lowest in 25 years, and just below 30% of global demand before the coronavirus outbreak.
That number is well above production cuts in the pipeline. The Organization of the Petroleum Exporting Countries (OPEC) and allied producers including Russia, a grouping known OPEC+, have agreed to reduce output by 9.7 million bpd, while hoped-for cuts of another 10 million bpd from other countries including the United States could lower production by 20 million bpd.
Last week, the EIA said U.S. production is expected to slump by 470,000 bpd.
“Given the scale of demand destruction this quarter, OPEC+ cuts will fall short of bringing the market to balance anytime soon, and this is reflected in the price weakness seen since the OPEC+ deal,” said ING bank in a note on Thursday.
Some countries have also committed to increasing purchases of oil for their strategic stockpiles, but there are physical limits to how much oil can be bought.
The “use of strategic petroleum reserves in China, India, South Korea, and the U.S. could add about 200 million barrels of temporary storage, but this only buys a few months of wiggle room,” said Innes.
Further cuts to production will be required “to avoid another collapse in oil prices,” he said.