WASHINGTON (DTN) -- Oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange moved mixed in market on close trade Wednesday, with both crude benchmarks settling the volatile session lower after reports emerged Russia again blocked a Saudi-led proposal to cut a collective 1.2 million barrels per day (bpd) from the global oil market as the coalition of 23-nation producers attempt to reach a compromise on a new production agreement.
Earlier in the session, oil futures shot up in response to the recommendation from OPEC+ Joint Ministerial Monitoring Committee to deepen the current 1.7 million bpd agreement though the second quarter. Russia is a member of JTC, suggesting the country must have given its consent for the larger cuts. However, around noon reports emerged of ongoing discord between the Russian and Saudi delegation about finalizing those cuts. Citing sources familiar with the matter, Reuters reported a panel of several ministers from OPEC and 10 other producers failed to clinch a preliminary agreement on Wednesday, with Russia's energy minister Alexander Novak leaving for Moscow to further consultations.
According to wire services, Saudi Arabia wants extra cuts of 1 million to 1.5 million bpd for the second quarter while keeping existing cuts of 1.7 million bpd in place until the end of 2020. "OPEC hopes for a cut bigger than 1 million [bpd] but the challenge is still Russia," one OPEC source said.
Markets will certainly view any production cut less than 1 million bpd as a bearish development, given the magnitude of coronavirus-induced demand shock over the last several weeks. On Tuesday, Goldman Sachs and Morgan Stanley revised lower their demand growth forecast for 2020 as a result of the virus spreading worldwide.
Morgan Stanley said on Tuesday it downgraded its oil demand growth forecast by 500,000 bpd from 800,000 bpd.
"We now expect China's oil demand growth in 2020 to be close to zero, from already low pre-COVID-19 growth expectations of 350 kb/d," the bank said in a note. "As COVID-19 has been spreading globally, demand outside China is likely to slow further," read a note from Morgan Stanley.
Oil futures failed to extend the rally even after inventory data from the Energy Information Administration showed domestic crude stocks increased by a much less than expected 784,000 bbl in the week ended Feb. 28, and both gasoline and distillate stocks posted hefty drawdowns. After building for sixth consecutive week, U.S. commercial crude inventories currently stand at 444.1 million bbl, about 4% below the five-year average. U.S. crude exports surged 497,000 bpd to 4.154 million bpd during the period, the second highest weekly export rate on record.
In refined fuels, data showed gasoline inventories declined 4.5 million bbl during the week-ended Feb. 28 to an eight-week low 252 million bbl. Distillate fuel inventories were drawn down a seventh consecutive week, sinking 4 million bbl to a nine-week low 134.464 million bbl.
At settlement, April West Texas Intermediate futures dropped $0.40 to $46.78 bbl and ICE Brent May futures slid $0.73 to $51.13 bbl. NYMEX April RBOB futures gained 2.42 cents to $1.5555 gallon and NYMEX April ULSD futures finished the session little changed at $1.5332 gallon.
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