Oil prices extended a rally Thursday after data showed US crude stockpiles rose less than expected and on signs that falling production may offset a coronavirus-triggered demand shock.
US benchmark West Texas Intermediate rose about six percent to $15.97 a barrel in Asian morning trade, after surging more than 30 percent on Wednesday. Brent crude, the international marker, was up 2.4 percent at $23.10 a barrel. Oil prices have plunged to historic lows in recent weeks as collapsing demand due to worldwide lockdowns prompted a massive glut and led to storage capacity filling up.
But prices began rallying strongly Wednesday after data from the US Energy Information Administration showed that crude stockpiles in the world’s biggest economy rose by about nine million barrels. That was below market expectations of a rise of 11.7 million barrels, according to analysts. There were also signs that demand may be improving with weekly gasoline supplied rising by 549,000 barrels a day, the most since May last year, Bloomberg News reported.
Edward Moya, senior market analyst with OANDA, said the bounce in prices came as traders bet that “demand will continue to improve and as global production levels are forced lower as storage capacity runs out”. A deal by top producers to cut output by almost 10 million barrels is also due to come into effect from Friday.
There have been signs that some countries have already started slashing production in line with the agreement, lending further support to prices. Oil prices also tracked a rally on global stocks overnight, which were boosted by news that a US company reported positive test results for a drug used in treating the coronavirus. “The vaccine is incredibly positive news for the oil market as it suggests a quicker recovery in global demand,” said Stephen Innes, chief global market strategist from AxiCorp.
