Oil prices rose on Wednesday after U.S. crude inventories grew less than expected, and gasoline recorded a sudden drop, adding to optimism that demand was improving as some EU and US cities moved to ease coronavirus closures.
Crude oil prices came under pressure as fuel demand around the world fell by about 30 percent. The major oil producing countries agreed in mid-April to cut production by nearly 10 million barrels per day, while shale producers and major oil companies cut production as well.
Brent crude futures rose by 11% or $2.23 at $22.69 a barrel and the US West Texas Intermediate (WTI) crude futures soared $3.58, or 29% to $15.92 a barrel following a massive decline last week.
"The report was optimistic - there was a modest increase in the demand for gasoline and the use of refineries. It could be the worst in terms of destroying demand." said John Kilduff, founding partner at New York hedge fund Again Capital.
US crude inventories ballooned by 9 million barrels last week to 527.6 million barrels, 7 million barrels lower than the record high.
The most notable data was the drop in US gasoline stocks by 3.7 million barrels from their highest levels last week despite the recovery of refinery production with the demand for fuel increasing modestly.
Gasoline demand has been down 44% over the past four weeks compared to the same period last year, but a weekly drop indicates consumption may drop. Overall fuel demand has decreased by 28% in a month period.
While US stocks are quickly filling, crude oil production cuts by US shale oil producers is estimated at 300,000 bpd as of May-June 2020, helping the prices to recover once again.
It is noteworthy that countries currently implementing social distancing accounted for more than 90% of oil demand last year.
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