Oil prices rose more than 10% on Wednesday in accordance with the optimism that fuel consumption will improve as US crude oil stocks grow less than expected and coronavirus lockups ease.
Crude oil prices dropped earlier this month, and global fuel decreased roughly 30% due to efforts to slow the spread of the virus. To alleviate the growing oil abundance, major oil producing countries have agreed to cut production by about 10 million barrels a day from early May. Shale gas producers and major oil companies are also reducing production.
U.S. West Texas Intermediate (WTI) crude futures settled at $15.06 a barrel, jumping $2.72, or 22%. Brent crude futures settled at $22.54 a barrel, up $2.08, or 10.2%.
The Energy Information Administration (EIA) said that US crude oil stocks rose by 9 million barrels last week to 527.6 million barrels, and record levels dropped below to nearly 7 million barrels. It’s a big figure at the end of the day, but it’s better than last three weeks. At least, the filling of the tanks with full capacity is delayed. It takes time to switch to severe crisis mode.
Regulators in Texas, the largest oil production state in the USA, will vote on whether they will accept production cuts on May 5th. Authorities in North Dakota and Oklahoma also discuss possible interruptions.
This will be an additional support to the production cuts of about 10 million bpd, accepted by the Organization of the Petroleum Exporting Countries and other major producers, including Russia.
Prices have also increased in the hope of improving demand, as European countries, including France and Spain, and some US states are planning to remove some restrictions soon.
As long as there is a need in the economy, it is not very likely that we will see sharp dips as we saw a week ago. However, it is not very close to be back to the days before the crisis.