A second straight day of a more than 20 percent increase in crude oil prices in the U.S. was reported on Thursday as West Texas Intermediate crude for June delivery rose $3.78 a barrel. This as storage at the Cushing hub is about 13 million barrels below its maximum capacity.
WTI finished Thursday’s trading on the New York Mercantile Exchange at $18.84 a barrel, up 25.1 percent. But prices were still down 8 percent from the front-month contract settlement on March 31.
Global benchmark June Brent crude added $2.73 and finished up 12.1 percent at $25.27 a barrel on ICE Futures Europe. The front-month contract prices ended the month 11.1 percent higher. Brent’s July contract gained $2.25 or 9.3 percent and ended the day at $26.48 a barrel.
Natural gas prices added 6 cents to reach $1.94 MMbtu on the New York Mercantile Exchange.
Oil has been hit by worries about oversupply by major producers amid the worst viral pandemic in more than century which has wrecked crude demand, while a dearth of places to store the commodity has served to further fuel its descent.
Hope of treatments for COVID-19, with the anticipation that seized up economies will eventually restart, have helped to stabilize expectations for greater appetite for crude in the future. Pledged aid by central bank, including the Federal Reserve and the European Central Bank, may also provide some support for oil bulls.
However, a report from the International Energy Agency released Thursday offered a more sober picture of the oil outlook, describing the COVID-19 pandemic as the “biggest shock to the global energy system in more than seven decades.”
“This is a historic shock to the entire energy world,” said Fatih Birol, executive director of IEA in a statement. “Amid today’s unparalleled health and economic crises, the plunge in demand for nearly all major fuels is staggering, especially for coal, oil and gas,” he said.
On Wednesday, the Energy Information Administration alleviated some fears that oil storage facilities would disappear imminently, showing that U.S. crude inventories rose a smaller-than-expected 9 million barrels for the week ended April 24. It also showed a weekly fall in gasoline stockpiles and total domestic crude production.
“A smaller than expected storage build in the U.S., and also a smaller than expected storage number at the NYMEX deliver point at Cushing has walked back the math by a couple weeks,” wrote Robert Yawger, director of energy at Mizuho Securities U.S.A. in a late Wednesday report, referring to the delivery hub for WTI oil in Oklahoma.
He estimated that there may be more oil storage capacity but says that it might not last for more than a month before facilities are topped out. Storage at Cushing is 12.6 million barrels below maximum capacity of 76 million.
“U.S. storage would reach maximum capacity in 14 weeks with storage at the NYMEX delivery site reaching maximum capacity in 3 to 4 weeks,” he said.
Back on Nymex, prices for petroleum products were mixed, with May gasoline RBK20, +3.45% down 4% at 69.78 cents a gallon and May heating oil HOK20, +10.82% up 5.4% at 73.19 cents a gallon. The May contracts expired at the end of day’s session, with front-month prices for gasoline up 21.7% for the month, but heating oil down 27.7%from the end of March.
June natural gas NGM20, +3.69% rose 4.3% to $1.949 per million British thermal units, with front-month prices up 18.8% in April.
The U.S. Energy Information Administration reported Thursday that domestic supplies of natural gas rose by 70 billion cubic feet for the week ended April 24. That was in line with average expectations for a rise of 69 billion cubic feet, according to a survey of analysts conducted by S&P Global Platts.
Source: Market Watch