A woman wearing face mask walks on the ocean front while Oil tankers are seen anchored off the coast of Long Beach, California, after sunset on April 25, 2020.
Apu Gomes | AFP | Getty Images
Oil prices jumped more than 25% on Wednesday following a report that showed a smaller-than-expected build in U.S. inventory, as well as on the hope that economies will reopen sooner-than-expected.
Optimism that economies will be able to re-open ahead of schedule rose after Gilead said early results of its coronavirus drug trial showed that at least 50% of patients treated with a 5-day dosage of antiviral drug remdesivir improved and more than half were discharged from the hospital within two weeks.
Stocks rose following the news, despite a 4.8% contraction for U.S. GDP in the first quarter — the largest contraction since the financial crisis.
Oil prices also got a boost after data from the American Petroleum Institute showed that U.S. crude inventories jumped by 10 million barrels in the week to April 24, bringing the total to 510 million barrels. That was lower than analysts’ expectations of a build of 10.6 million barrels, according to estimates from Reuters.
Official data from the U.S. Energy Information Administration will be released at 10:30 a.m. ET.
“Oil prices rose on Wednesday morning as traders cling to potentially positive indications that the demand-supply gap may somewhat become smaller soon,” Rystad Energy’s global head of oil markets Bjornar Tonhaugen told CNBC.
“Overall we need official announcements for cuts or economies reopening for prices to stabilize. Expect a lot of volatility and price swings either way in coming days as bullish and bearish traders weigh their hopes and fears in a market that is desperate to find something to hang on,” he added.
Oil prices swayed wildly on Tuesday between gains and losses as investors continue to keep an eye on depleting crude storage space amid a dearth in demand. The coronavirus pandemic, which has forced countries around the world to shut their economies temporarily as people are told to stay home, has reduced global demand for crude by as much as a third, according to some estimates.
WTI for June delivery fell 44 cents, or 3.4%, to settle at $12.34 per barrel on Tuesday. International benchmark Brent crude, on the other hand, gained 47 cents, or 2.35%, to settle at $20.46.
In a note dated April 28, Moody’s Investors Service said it was reducing its near-term oil price assumptions for WTI as well as Brent.
“Exceptionally weak short-term prices will persist until production drops enough to ease the strain on storage facilities already operating at or close to full capacity,” said Elena Nadtotchi, vice president and senior credit officer at Moody’s. “Significant supply adjustments in due course should help to balance the market later in 2020, but the pace of the market’s rebalancing and rising oil prices will depend on demand recovery.”
Moody’s price prediction for WTI is currently $30 per barrel this year, and $40 next year. For Brent, it sees prices averaging $35 per barrel in 2020 and $45 in 2021.
— CNBC’s Sam Meredith contributed to this report.