Oil prices rise amid early signs of fuel demand picking up

MELBOURNE/SINGAPORE (Reuters) – Oil prices jumped on Thursday, buoyed by signs that the U.S. crude glut is not growing as quickly as expected and that fuel demand battered by COVID-19 restrictions is starting to pick up.

West Texas Intermediate (WTI) crude futures CLc1 climbed to a high of $17.75 a barrel and were up 9.2{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}, or $1.39, at $16.45 at 0640 GMT. The U.S. benchmark surged 22{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} on Wednesday.

Brent LCOc1 was up 5.6{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}, or $1.27 at $23.81 a barrel in light trading, with the June contract expiring on Thursday. The contract hit a high of $25 earlier in the session, having posted a 10{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} gain on Wednesday.

The most active Brent crude contract for July LCOc2 was up $1.15 or about 5{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}, at $25.38 a barrel.

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

U.S. gasoline stockpiles fell 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,” ING’s head of commodities strategy Warren Patterson said.

Adding to positive sentiment, China Petroleum & Chemical Corp (Sinopec) said on Thursday its daily sales of refined oil products have risen to more than 90{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} of levels seen before the coronavirus outbreak.

“WTI could quickly move to $20 a barrel and Brent to $30 a barrel in this environment,” said Jeffrey Halley, senior market analyst at OANDA brokerage in Singapore.

“In the context of the size of the overall decline in oil prices since the pandemic began, the recovery is still minuscule,” he added. “No one should mistake this week’s rallies as the beginning of the end of the destruction wrought in the world’s energy markets.”

Global energy demand could slump by a record 6{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} in 2020 due to economic lockdowns from the coronavirus pandemic, the International Energy Agency (IEA) said on Thursday.

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.

Meanwhile, Western Europe’s largest oil producer Norway said it will slash its output from June to December of 2020, the first time in 18 years it has joined other major producers to shore up prices.