LONDON: Oil prices jumped on Thursday, lifted by signs the US crude glut is not growing as quickly as expected and indications of a rise in fuel demand, which has been crushed by the coronavirus.
Benchmark Brent was up 11.4%, or $2.57, at $25.11 a barrel at 1100 GMT in light trading. The front-month contract for June is set to expire on Thursday, having risen 10% on Wednesday.
The more actively traded Brent crude contract for July was up $1.97, or 8.1%, at $26.20 a barrel.
US West Texas Intermediate (WTI) crude climbed to $17.30 a barrel, up 14.9%, or $2.24. The US benchmark surged 22% on Wednesday.
US crude inventories grew by 9 million barrels last week to 527.6 million barrels, US Energy Information Administration (EIA) data showed, well below the 10.6-million-barrel rise analysts polled by Reuters had expected.
US gasoline stockpiles fell by 3.7 million barrels from record highs the previous week, with a slight rise in fuel demand offsetting 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 and Chemical Corp (Sinopec) said on Thursday its daily sales of refined oil products had climbed and were now more than 90% of levels seen before the coronavirus outbreak.
But indicating the depth of the crisis facing the industry after the unprecedented drop in demand, Royal Dutch Shell said on Thursday it was cutting its dividend for the first time since World War Two.
Storage concerns continue to weigh with the International Energy Agency (IEA) saying global capacity could reach its maximum by mid-June and energy demand could slump by a record 6% in 2020.
“If the already stretched storage capacity is getting fuller and fuller every week, a rise in prices cannot be sustainable for long as the problem is not really resolved,” said Rystad Energy’s head of oil markets Bjornar Tonhauge.
“At around 80-90% full, traders keep on seeing the storage glass as half empty when it is not even half full. It’s close to overflowing, even at a lower speed.”
US President Donald Trump said his administration would soon release a plan to help US oil companies. Treasury Secretary Steven Mnuchin said it could include adding millions of barrels of oil to national reserves.
Western Europe’s largest oil producer Norway said it would slash output from June to December, the first time in 18 years it has joined other major producers in action to prop up prices.