Oil prices rise on better-than-feared US stockpile data
Oil prices jumped today after US stockpiles rose less than feared and petrol stocks fell.
Oil was also buoyed by hopes demand would increase as some European countries and US states moved towards an easing of lockdown rules.
West Text Intermediate crude prices rose 35 per cent to $16.66 a barrel this afternoon.
Brent Crude prices climbed 14.2 per cent to $23.37 a barrel shortly after 4pm UK time,
US crude inventories rose by 10m barrels to 510m barrels in the week to 24 April, data from the American Petroleum Institute (API) showed today, compared with analyst expectations of 10.6m barrels.
Petrol stocks fell by 1.1m barrels, the API said, compared with analyst forecasts for a rise of 2.5m barrels.
“In part thanks to better than expected, or more accurately not as bad as feared, US inventory data, WTI prices have managed to make up lost ground,” JBC Energy said.
“Aside from a Cushing build that was hardly extravagant, API inventory data reportedly also hinted at the first gasoline stock draw in several weeks; a signal which optimistic market observers tend to like.”
The market will get another read on US inventories when the US Energy Information Administration releases weekly data later tomorrow.
While storage is rapidly filling up, production cuts by US shale producers – estimated by consultants Rystad Energy at 300,000 barrels per day (bpd) for May and June – should help to slow flows into tanks. The United States is now the world’s biggest oil producer.
“One ray of hope for WTI, though, could occur next week,” said Jeffrey Halley, market analyst at OANDA.
Sign up to City PM’s Midday Update newsletter, delivered to your inbox every lunchtime
Regulators in Texas, the country’s biggest oil producer, will hold a vote on 5 May on whether to enact output cuts.
Officials in the states of North Dakota and Oklahoma are also examining ways to legally allow output cuts.
That would add to production cuts of almost 10m bpd agreed by the Organisation of the Petroleum Exporting Countries and other large producers including Russia. The agreed cuts, equivalent to about 10 per cent of global production, are due to take effect from 1 May.
At the same time, hopes for at least some demand recovery put a floor under oil prices after two days of selling in June contracts by exchange-traded funds looking to avoid the extreme volatility that hit the WTI May futures contract last week.
“The other thing coming through is more detail and a louder groundswell towards plans for removing covid restrictions, particularly in Europe,” said Lachlan Shaw, head of commodity research at National Australia Bank in Melbourne. “That’s going to see demand pick up.”
Countries that have social distancing measures in place now account for more than 90 per cent of last year’s oil demand, Morgan Stanley research showed.