UPDATE 1-Oil prices slip as demand shrinks, but stimulus supports

Reuters

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    * Swelling supplies and inventories weigh
    * Losses capped as U.S. Senate passes $2 trln stimulus 
    * Demand loss in Q2 estimated around 15 mln bpd - analysts
    * Oil prices may fall to $10/bbl as inventories fill -
analyst

 (Adds bullets, analyst quotes and detail, updates prices)
    By Roslan Khasawneh
    SINGAPORE, March 26 (Reuters) - Oil prices slipped on
Thursday following three days of gains, with the prospect of
rapidly dwindling demand due to coronavirus travel bans and
lockdowns offsetting hopes a U.S. $2 trillion emergency stimulus
will shore up economic activity.
    Brent crude  LCOc1  futures fell 19 cents, or 0.7%, to
$27.20 a barrel by 0441 GMT. West Texas Intermediate (WTI) crude
 CLc1  futures fell 37 cents, or 1.5%, to $24.12 a barrel. Both
contracts are down about 60% this year.
    "Oil markets received a lift from the U.S. stimulus chatter,
but for the most part activity remains rudderless, awash in a
sea of oil," said Stephen Innes, market strategist at AxiTrader.
    The U.S. Senate on Wednesday overwhelmingly backed a $2
trillion bill aimed at helping unemployed workers and industries
hurt by the coronavirus epidemic.  urn:newsml:reuters.com:*:nL1N2BI0KN
    But with demand fast contracting and output rising, the
outlook for oil remains dim. 
    IHS Markit estimated global oil demand will contract by more
than 14 million barrels per day (bpd) in the second quarter,
leading to unprecedented inventory builds.
    "Expect fundamental pressure concentrated over March and
April, an eight-week blitz period over which stocks currently
stand to build north of 1 billion barrels cumulatively," said
Roger Diwan, vice president of financial services at IHS Markit.
    At the same time, the collapse of a supply-cut pact between
the Organization of the Petroleum Exporting Countries and other
producers led by Russia, known as OPEC+, is set to boost oil
supply, with Saudi Arabia planning to ship more than 10 million
bpd from May.  
    Oil stocks are already rising with tanks around the world
filling fast despite a 50%-100% jump in lease costs, as oil
companies and traders scramble to park unwanted crude and
refined products.  urn:newsml:reuters.com:*:nL8N2BH3AM
    "At that tipping point, the producer surplus will become a
massive logistical headache for oil storage consideration, which
then opens up the trap door for oil prices to plummet below cash
costs," said Innes. 
    Vienna-based JBC Energy said it expected world oil demand to
fall by an even larger 15.3 million bpd in the second quarter,
likely pushing benchmark prices, at least temporarily, to around
$10 per barrel. 
    "OPEC+ as an organisation is of pretty limited relevance in
this context, as they are neither likely to be willing nor able
to stem the current demand shock," said Johannes Benigni,
chairman at JBC Energy in a note on Wednesday. 
    U.S. crude inventories rose by 1.6 million barrels in the
most recent week, the U.S. Energy Information Administration
said on Wednesday, marking the ninth straight week of increases.
 urn:newsml:reuters.com:*:nL1N2BI12C
    Products supplied, a proxy for U.S. demand, dropped nearly
10% to 19.4 million bpd, EIA data showed. 
         

 (Reporting by Roslan Khasawneh in SINGAPORE and Sonali Paul in
MELBOURNE; editing by Richard Pullin)
 ((roslan.khasawneh@thomsonreuters.com; +65 6870 3121; Reuters
Messaging: roslan.khasawneh.thomsonreuters.com@reuters.net))

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