UPDATE 7-Oil falls 3% despite surprise U.S. crude stock drawdown

* U.S. crude stocks drop for first time since January- EIA
* Fed's Powell warns of prolonged economic weakness
* New coronavirus outbreaks emerge in S. Korea and China
* Global oil demand to fall by 8.1 mln bpd in 2020 -EIA

(Updates crude prices)
By Jessica Resnick-Ault
NEW YORK, May 13 (Reuters) - Oil prices fell more than 3% on
Wednesday despite the first decline in U.S. crude inventories
since January, as markets were affected by a solemn address from
the U.S. Federal Reserve chairman warning that economic recovery
from the coronavirus pandemic would take many months.
The markets have rallied in the last several days on
optimism that fuel demand destruction has bottomed out and
producers have aggressively cut production to deal with the
supply glut due to the pandemic. However, with governments
signaling a long period before activity rebounds, risk assets
like stocks and oil slipped on Wednesday. MKTS/GLOB
Brent crude LCOc1 fell 85 cents a barrel, or 2.9% to
$29.12 by 2:13 p.m. EDT (1813 GMT), after hitting a low of
$28.92 a barrel earlier.
West Texas Intermediate crude futures CLc1 fell 78 cents,
or 3%, to $25.00.
U.S. Federal Reserve Chair Jerome Powell gave a solemn
assessment of the U.S. economy and renewed his skepticism of
negative interest rates. "There's just a dark cloud because of that," said Bob
Yawger, director of energy futures at Mizuho in New York. "It
was such a negative speech it even eliminated what was easily
the most bullish (weekly U.S. oil inventory) report since
January," he said.
U.S. crude stockpiles USOILC=ECI fell by 745,000 barrels
last week, the U.S. Energy Information Administration said,
compared with analysts' expectations in a Reuters poll for a 4.1
million-barrel rise. EIA/S
Stocks in the Cushing, Oklahoma, storage hub USOICC=ECI
fell 3 million barrels, the EIA said, filling the delivery point
for WTI to more than 80% of capacity as producers find
themselves with fewer places to store oil.
Globally, fears of a slow recovery are overhanging the
market.
"Fears are running rife that easing lockdown measures will
trigger a second wave of coronavirus infections," said Stephen
Brennoc at oil brokerage PVM.
U.S. infectious disease expert Anthony Fauci on Tuesday told
Congress that easing coronavirus lockdowns could set off new
outbreaks of the COVID-19 disease that has killed 80,000
Americans and badly damaged the world's biggest economy and oil
consumer. New outbreaks have been reported in South Korea and China,
where the health crisis started before spreading across the
globe, prompting governments to lock down billions of people,
devastating economies and demand for oil. The EIA now expects world oil demand to fall by 8.1 million
barrels per day (bpd) this year to 92.6 million bpd, compared
with a previous forecast for a drop of 5.2 million bpd.
The statistical arm of the U.S. Department of Energy also
expects U.S. output to fall by 540,000 bpd, against a previous
forecast of 470,000 bpd. It expects global output of 11.7
million bpd this year and 10.9 million bpd in 2021.
The Organization of the Petroleum Exporting Countries also
slashed its world oil demand forecast, now expecting it to
contract by 9.07 million bpd this year, it said in a monthly
report. Last month, OPEC expected a contraction of 6.85 million
bpd. OPEC and other producers including Russia, a group known as
OPEC+, are looking to maintain existing cuts beyond June, when
it meets next in Vienna, sources told Reuters.
OPEC+ agreed to cut output by 9.7 million bpd in May and
June and to scale back cuts to 7.7 million bpd for the rest of
the year.
Saudi Arabia's cabinet has urged OPEC+ countries to reduce
output further to restore balance in global crude markets, the
country's state news agency reported early on Wednesday.
Riyadh said it would add to planned cuts by reducing
production by a further 1 million bpd next month, bringing
output down to 7.5 million bpd. "Suffice to say, the tug-of-war between OPEC-led cuts and
virus anxieties will limit upside price potential," PVM's
Brennoc said.

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CHART: Brent oil still targets $28.43 U.S. oil may test support at $24.31 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>