Oil futures settled higher on Wednesday, with U.S. benchmark prices rallying by 22% as government data showed a slightly smaller-than-expected weekly climb in domestic crude supplies, along with declines in gasoline stocks and oil production.
Oil also got a boost on hopes for a rebound in demand as some countries look to ease pandemic-related shutdowns and amid apparent progress on a clinical trial for Gilead Sciences Inc.’s experimental conronavirus treatment.
“Countries around the world are desperate to reopen for business, even hard-hit Italy and the U.S., signaling intentions to bring their economies back to working mode soon, said Bjornar Tonhaugen, head of oil markets at Rystad Energy.
“Such a development could indeed bring some oil demand back, but not that much for the hardest-hit road fuels yet as travel restrictions remain,” he said in market commentary. “Again, intentions are not actions yet, but they are enough to get trading going, as market participants do not want to miss the positive sentiment in case these hopes materialize.”
West Texas Intermediate crude for June delivery rose $2.72, or 22%, to settle at $15.06 a barrel on the New York Mercantile Exchange. Tracking the front-month contracts, prices were looking at a monthly decline of more than 26%, Dow Jones Market Data show, as the COVID-19 pandemic has sapped demand for crude and products.
On the ICE Futures Europe exchange, June Brent crude BRNM20, 9.49%, the global benchmark, added $2.08, or 10.2%, to $22.54 a barrel ahead of the contract’s expiration at Thursday’s settlement. Based on the front-month contract at the end of March, prices were poised for a monthly decline of 0.9%.
The Energy Information Administration reported Wednesday that U.S. crude inventories rose 9 million barrels for the week ended April 24. That marked a 14th consecutive weekly rise, but was slightly lower than the average increase of 9.8 million barrels forecast by analysts polled by S&P Global Platts. The American Petroleum Institute on Tuesday reported a climb of nearly 10 million barrels.
Crude stocks at storage hub Cushing, Okla. rose roughly 3.7 million barrels to 63.4 million barrels in the latest week, while total domestic oil production edged down by 100,000 barrels to 12.1 million barrels, according to EIA data.
“Cushing supplies had another large build and storage space is running out,” said Tariq Zahir, managing member at Tyche Capital Advisors. “Until we see some sort of demand come back or production cuts and shut in of wells, we feel crude is going to be quite volatile.”
“A sustained rebound will be hard to come by in regard to prices,” he told MarketWatch.
Gasoline supply fell by 3.7 million barrels, while distillate stockpiles added 5.1 million barrels, the EIA said. The S&P Global Platts survey had shown expectations for supply increases of 2.9 million barrels for gasoline and 4.3 million for distillates.
On Nymex, May gasoline rose 9% to 72.72 cents a gallon—the highest finish for the front-month contract since March 13. May heating oil tacked on 10.1% to 69.45 cents a gallon, posting the largest daily percentage gain since Sept. 16, 2019. The May contracts expire at the end of Thursday’s session.
May natural gas settled at $1.869 per million British thermal units, down 4.1%. The EIA will issue its weekly update on stocks of the fuel Thursday, with a poll of analysts conducted by S&P Global Platts showing an average forecast for a rise of 69 billion cubic feet for the week ended April 24.
On Tuesday, U.S. benchmark prices ended lower as worries about tightening oil storage capacity and the steep decline in demand on the back of efforts to stem the spread of COVID-19 continued to pressure the market.
The collapse in the U.S. economy caused by the coronavirus pandemic triggered the biggest drop in gross domestic product in the first quarter since 2008 in a prelude to an even more massive decline in the spring. GDP, the official scorecard for economic growth, shrank at a 4.8% annualized pace.
GDP shrank at a 4.8% annualized pace from the beginning of January to the end of March, the government said Wednesday.
Also Wednesday, the U.S. Federal Reserve said it was committed to using its full range of tools to help the economy as it faces considerable risk from the coronavirus pandemic.