US crude prices shot higher in another day of volatile trading on Wednesday, as traders bet that the gradual reopening of some western economies would ease the most dramatic collapse in oil demand in history.

West Texas Intermediate, the US benchmark, has endured wild swings over the past week after falling into negative territory for the first time on April 20. The market had been spooked by signs that storage was running out after a decline of nearly 30 per cent in demand for oil as economies went into lockdown.

But on Wednesday the WTI contract for June delivery jumped from $12 a barrel to about $16 a barrel. Traders pointed to signs that the worst of the demand destruction might be coming to an end, as parts of Europe and North America began easing some virus-related restrictions.

“There is mounting optimism that lockdown measures will soon be relaxed which in turn will provide oil demand with a much-needed shot of adrenalin,” said Stephen Brennock at oil brokerage PVM.

Oil prices are still down more than 70 per cent since January, having started the year near $60 a barrel, but on Wednesday WTI gained as much as 36 per cent to a high of $16.78 a barrel, before easing to $15.79 in late afternoon trading in London. 

Brent crude oil, the international benchmark, rose 11 per cent to $22.61 a barrel.

The oil sector has struggled to cope with the sudden decline in crude demand since early March. Storage has rapidly filled up as unwanted barrels have poured into ships and static supertankers around the world, contributing to fears that the normally 100m barrel-a-day global oil market could buckle unless producers started to reduce output.

Oil producer group Opec and its allies are aiming to cut around 10 per cent of production from May, while US producers have scaled back activity as prices have fallen. But traders are concerned the market could still be overwhelmed by the glut.

US crude inventories increased by 9m barrels last week and are close to an all-time high, according to the US Energy Information Administration. Traders had feared an even larger increase.

Bjornar Tonhaugen at Rystad Energy said traders were clinging to “potentially positive indications that the demand-supply gap may somewhat become smaller soon” but warned it was too soon to say if WTI’s rally was sustainable.

“Expect a lot of volatility and price swings either way in coming days as bullish and bearish traders weight their hopes and fears in a market that is desperate to find something to hang on.”

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