More gains for oil, stocks as demand shows signs of recovery
Hopes over a new coronavirus drug treatment and budding signs of economic recovery fuelled investor optimism.
Oil prices rose again on Thursday, building on big gains in the previous session on signs the United States crude glut is not growing as fast as expected and that petrol demand battered by COVID-19 restrictions is starting to pick up.
A day earlier, US Energy Information Administration (EIA) data showed a surprise drop in petrol stockpiles and a jump in demand, as US crude oil inventories grew by 9 million barrels last week to 527.6 million barrels, well below the 10.6 million-barrel rise, the analysts polled by Reuters news agency had expected.
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US West Texas Intermediate (WTI) crude futures climbed to a high of $16.25 a barrel and were up 7.2 percent, or $1.08, at $16.14 at 01:47 GMT. The US benchmark surged 22 percent on Wednesday.
Brent crude rose 3.9 percent, or 88 cents, to $23.42 a barrel in light trading, with the June contract expiring on Thursday. The contract hit a high of $23.65 in early trading, having posted a 10 percent gain on Wednesday.
“In the current environment, the market appears desperate for any positive signs, no matter how mild they seem,” ING head of commodities strategy Warren Patterson and senior commodities strategist Wenyu Yao wrote in a note.
But the world continues to face an oversupply of oil that needs to be cleared before any meaningful recovery in prices can happen.
A fleet of supertankers carrying 43 million barrels of Saudi Arabian crude is bearing down on the US, which will add to the oversupply in the world’s largest economy.
“Oil appears to have caught some tailwinds” with the EIA data less bearish than expected and petrol demand recovering, said Vandana Hari, the founder of Vanda Insights in Singapore. “But it’s too early to call an inflection point.”
In stock markets, Asian shares rose on Thursday as optimism was supported by encouraging early results from a COVID-19 treatment trial.
MSCI’s broadest index of Asia-Pacific shares excluding Japan climbed by 0.8 percent to its highest since mid-March while Japan’s Nikkei, returning from a Wednesday holiday, jumped 2.5 percent.
Wall Street ended trading on Wednesday higher, with the Dow Jones Industrial Average climbing 2.21 percent and the S&P 500 closing up 2.66 percent.
Anthony Fauci, the top US infectious disease official, said Gilead’s antiviral remdesivir will become the standard of care for COVID-19 after early results from a trial seemed to show it helped speed recovery.
“Any positive medical development is helpful,” said Westpac FX analyst Sean Callow. “But no one should be counting on a major breakthrough – the key for markets is control of the spread of the virus,” he said.
Other assets such as currencies and bonds were traded more cautiously in the run-up to a European Central Bank meeting later in the day. The US dollar and US futures were firm, while gold was steady at $1,711.31 per ounce.
As other major economies ramp up fiscal and monetary stimulus to support businesses and households during the pandemic, the ECB is under increasing pressure to deliver even more support.
Analysts say the ECB may expand its bond buying programme even as European leaders seem unable to agree on the details of a rescue package.
“The tone has been set for the ECB to ‘do whatever it takes’ via its bond purchase programmes in terms of size, composition and maturity,” strategists at Singapore’s DBS Bank said in a note.