Oil prices rise on dip in US crude stockpiles and IEA data

Oil prices settled higher on Thursday after the International Energy Agency (IEA) forecast lower global stockpiles in the second half of 2020, although worries remain that a second surge in coronavirus infections could occur in coming months.

Crude prices have ticked up in the last two weeks as some countries relaxed coronavirus restrictions to allow factories and shops to reopen.

West Texas Intermediate crude for June delivery rose 9 percent to settle at $27.56 a barrel in New York. Brent for July settlement improved 6.7 percent to end the session at $31.13 a barrel.

The market rebounded from Wednesday’s losses, when United States Federal Reserve Chairman Jerome Powell warned of an “extended period” of weak economic growth.

Initial claims for state unemployment benefits totalled a seasonally adjusted 2.98 million for the week ending May 9, the US Department of Labor said on Thursday. While that was down from 3.18 million in the prior week and marked the sixth straight weekly drop, claims remain astoundingly high.

“Gasoline demand correlates pretty well with the employment level, and it’s hard to see gasoline demand come back much more than it already has,” said John Kilduff, partner at Again Capital LLC in New York. 
US crude inventories fell for the first time in 15 weeks, the EIA said on Wednesday, with a fall in US crude stockpiles of 745,000 barrels to 531.5 million barrels in the week to May 8.

On Thursday, the IEA again forecast a record drop in demand in 2020, although it trimmed its estimate for the fall, citing measures to ease lockdowns.

As demand increases, the IEA expects crude stockpiles to shrink by about 5.5 million barrels per day in the second half of 2020.

“While these supply and demand dynamics are certainly capable of boosting prices [in the] near term, a potential record level of global crude supply will remain as a force to be reckoned with,” Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois, said in a report.

The Organization of the Petroleum Exporting Countries (OPEC) said on Wednesday that it expected 2020 global oil demand to shrink by 9.07 million bpd, a deeper contraction than its previous forecast of 6.85 million bpd. OPEC also said it expected the second quarter to see the steepest decline. In response, Saudi Arabia deepened its planned cuts for June, reducing output by nearly 5 million barrels per day.

“The Saudis going from market wreckers to market makers again and leading by example has sent a very supportive message,” Kilduff said.

The US Commodities Futures Trading Commission warned exchanges and brokerages on Thursday that they should be prepared for volatility and possible negative pricing for certain contracts as expiration approaches next week.