Oil prices surge over 10% Thursday (Update)

West Texas Intermediate (WTI) crude futures climbed to a high of US$17.35 a barrel and were up 14.3%, or $2.15, at $17.21 at 0350 GMT. The U.S. benchmark surged 22% on Wednesday. Brent crude rose 10.3%, or $2.33 to $24.87 a barrel in light trading, with the June contract expiring on Thursday. The contract hit a high of $24.91 earlier in the session, having posted a 10% gain on Wednesday

MELBOURNE/SINGAPORE: Oil prices jumped on Thursday, extending steep gains in the previous session on signs the U.S. crude glut is not growing as quickly as expected and that gasoline demand battered by COVID-19 restrictions is starting to pick up.

West Texas Intermediate (WTI) crude futures climbed to a high of US$17.35 a barrel and were up 14.3%, or $2.15, at $17.21 at 0350 GMT. The U.S. benchmark surged 22% on Wednesday.

Brent crude rose 10.3%, or $2.33 to $24.87 a barrel in light trading, with the June contract expiring on Thursday. The contract hit a high of $24.91 earlier in the session, having posted a 10% gain on Wednesday.

The most active Brent crude contract for July was up $2.10 or 8.7%, at $26.33 a barrel.

U.S. oil plunged into minus territory last week as the May contract was expiring, but analysts said the market, while still volatile, appears to have found a floor.

"I think we're closer to an equilibrium price for WTI between $15 and $20. That reflects all of the known knowns - the demand destruction that has led to storage filling up and pending supply cuts," said Michael McCarthy, chief market strategist at CMC Markets and Stockbroking in Sydney.

U.S. crude inventories grew by 9 million barrels last week to 527.6 million barrels, U.S. Energy Information Administration data showed on Wednesday. This was well below the 10.6 million-barrel rise analysts polled by Reuters had expected. [EIA/S]

"In the current environment, the market appears desperate for any positive signs, no matter how mild they seem. The focus this week has been on inventory and demand numbers from the U.S.," ING's head of commodities strategy Warren Patterson said.

U.S. gasoline stockpiles dropped by 3.7 million barrels from record highs the previous week, with a slight rise in fuel demand offseting a rebound in refinery output.

"If we see a continuation of this trend in the coming weeks, it could suggest the worst might be behind the oil market," Patterson said.

U.S. President Donald Trump said his administration will soon release a plan to help the country's oil companies, which Treasury Secretary Steven Mnuchin said could include adding millions of barrels of oil to already-teeming national reserves.

Private storage in U.S. is approaching full capacity and the government's Strategic Petroleum Reserve hold only 78 million barrels of spare capacity. - Reuters

Earlier report:

Oil price posts double-digit gains

NEW YORK: Oil prices surged more than 10% on Wednesday after U.S. crude stockpiles grew less than expected and gasoline posted a surprise draw, feeding optimism that fuel consumption will recover as some European countries and U.S. state ease coronavirus lockdowns.

Crude prices crashed earlier this month, with global fuel tanking roughly 30% due to efforts to slow the spread of the virus. To ease the growing glut, major oil producing-nations agreed in mid-April to cut output by nearly 10 million barrels per day. Shale producers and oil majors are also reducing production.

U.S. West Texas Intermediate (WTI) crude futures settled at US$15.06 a barrel, jumping $2.72, or 22%. Brent crude futures settled at $22.54 a barrel, up $2.08, or 10.2%.

U.S. crude oil inventories swelled by 9 million barrels last week to 527.6 million barrels, about 7 million barrels below their record high, the Energy Information Administration said. The build was slightly less than the 10.6 million-barrel rise analysts had expected in a Reuters poll. [EIA/S]

"The crude oil number is a big number at the end of the day, but it's not as big of a number that we had for the last three weeks," said Bob Yawger, director of futures at Mizuho in New York. The slowing build has delayed U.S. crude storage from filling to the brim, Yawger said, a scenario that would likely send prices plunging into negative territory again.

"The time to total crisis mode has been kicked down the road a little bit," he said.

The data included a notable drawdown in U.S. gasoline stockpiles of 3.7 million barrels from record highs last week as a modest pickup in fuel demand offset a rebound in refinery output.

Gasoline demand over the past four weeks remained down 44% from a year earlier, but the drawdown suggested consumption declines may be leveling off. Overall fuel demand has dropped by 28% in the last four weeks.

While U.S. storage is rapidly filling, crude production cuts by U.S. shale producers - estimated by consultants Rystad Energy at 300,000 barrels per day (bpd) for May and June - should slow flows into tanks.

Regulators in Texas, the biggest U.S. oil producing state, will vote on May 5 whether to enact output cuts. Officials in North Dakota and Oklahoma are also examining possible cuts.

That would add to production curbs of almost 10 million bpd agreed by the Organization of the Petroleum Exporting Countries and other large producers including Russia.

Prices also got a boost from hopes for a demand recovery as European countries including France and Spain, along with several U.S. states planned to lift some lockdown restrictions soon.

"As long as we see openings in the economy, we will not see plunges like we saw a week ago," said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut. "But markets heading back up to pre-crisis days are going to be tough to come by." - Reuters