Brent crude is rising after hitting a century low due to the coronavirus crisis

By Alex Lawler

LONDON (Reuters) – Brent crude rose on Wednesday after falling below $16 a barrel to its lowest level since 1999, supported by the outlook for voluntary and forced output cuts to address a glut caused by the coronavirus crisis.

This month, OPEC+ agreed on further cuts in oil production, but global measures to prevent the spread of the virus have caused demand to fall further. It is also expected that lower prices will cause production to be reduced for economic reasons or due to lack of storage.

International benchmark Brent crude, which had fallen 24% in the previous session, touched $15.98 a barrel on Wednesday, its lowest level since June 1999. By 12:25 GMT, it had recovered to $19.72 dollars, up 39 cents or 2%.

US West Texas Intermediate was up 9 cents, or 0.8%, at $11.66.

“Overall, we are at price levels that will have a strong impact on global production,” said Olivier Jakob, oil analyst at Petromatrix. “We’re getting close to $5 a barrel for some types of crude oil.”

The prospect of supply outstripping demand for several months at least led to two of the wildest days of oil trading in history this week. The nearby US contract fell into negative territory for the first time on Monday.

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

Wednesday’s drop in Brent sent prices back at a time when OPEC is also tackling a supply glut and businesses and consumers were worried – needlessly, as it turned out – about the Millennium Bug affecting computers after the beginning of the century.

In the latest sign of oversupply, the American Petroleum Institute reported on Tuesday that US crude inventories rose by 13.2 million barrels.

The official US government supply report is due later on Wednesday.

Although OPEC+ agreed this month to cut production by 9.7 million bpd starting in May, producers are already considering additional steps.

Saudi Arabia said on Tuesday it was prepared to take further action with other producers. Iraq made similar comments, although the next official meeting of OPEC+ is in June.

The United States and other countries also said this month they would pump less, supporting OPEC+ efforts.

But in a development that raises doubts about a formal U.S. supply cut, two of three Texas regulators on Tuesday delayed a vote to force producers to cut output.

(Reporting by Aaron Sheldrick; Editing by David Goodman and Jane Merriman)