LONDON – Oil prices gained on Wednesday after U.S. stockpiles rose less than expected and gasoline stocks fell, with support also coming from hopes that demand will improve as some European countries and U.S. cities moved to ease coronavirus lockdowns.
June Brent crude LCOc1 futures were up 5.3%, or $1.09, at $21.55 a barrel by 1054 GMT. The more active July contract added 94 cents, or 4.1%, to $23.68.
U.S. West Texas Intermediate (WTI) crude CLc1 futures jumped 13.1% or $1.62, to $13.96 after a 27% plunge over the first two days of the week.
U.S. crude inventories rose by 10 million barrels to 510 million barrels in the week to April 24, data from the American Petroleum Institute (API) showed on Tuesday, compared with analyst expectations of 10.6 million barrels.
Gasoline stocks fell by 1.1 million barrels, the API said, compared with analyst forecasts for a rise of 2.5 million barrels.
“In part thanks to better than expected, or more accurately not as bad as feared, U.S. inventory data, WTI prices have managed to make up lost ground,” JBC Energy said.
“Aside from a Cushing build that was hardly extravagant, API inventory data reportedly also hinted at the first gasoline stock draw in several weeks; a signal which optimistic market observers tend to like.”
The market will get another read on U.S. inventories when the U.S. Energy Information Administration releases weekly data later on Wednesday.
While storage is rapidly filling up, production cuts by U.S. shale producers – estimated by consultants Rystad Energy at 300,000 barrels per day (bpd) for May and June – should help to slow flows into tanks. The United States is now the world’s biggest oil producer.
“One ray of hope for WTI, though, could occur next week,” said Jeffrey Halley, market analyst at OANDA.
Regulators in the U.S. state of Texas, the country’s biggest oil producer, will hold a vote on May 5 on whether to enact output cuts.
Officials in the states of North Dakota and Oklahoma are also examining ways to legally allow output cuts.
That would add to production cuts of almost 10 million bpd agreed by the Organization of the Petroleum Exporting Countries (OPEC) and other large producers including Russia. The agreed cuts, equivalent to about 10% of global production, are due to take effect from May 1.
At the same time, hopes for at least some demand recovery put a floor under oil prices after two days of selling in June contracts by exchange-traded funds looking to avoid the extreme volatility that hit the WTI May futures contract last week.
“The other thing coming through is more detail and a louder groundswell towards plans for removing COVID restrictions, particularly in Europe,” said Lachlan Shaw, head of commodity research at National Australia Bank in Melbourne. “That’s going to see demand pick up.”
Countries that have social distancing measures in place now account for more than 90% of last year’s oil demand, Morgan Stanley research showed.