Oil prices surged for a third straight day Thursday amid evidence that fuel demand is starting to return, compounding the benefit from production cuts by the world’s largest producers starting on May 1.
West Texas Intermediate crude oil, the U.S. benchmark, was trading up 17 percent at $17.65 per barrel while Brent crude oil, the international benchmark, was higher by 13 percent at $25.43 per barrel.
The energy components fell 75 percent and 65 percent, respectively, this year through Wednesday.
Oil is rallying because “demand destruction has bottomed out and production will drop,” Phil Flynn, senior market analyst at the Price Futures Group, told FOX Business.
He added the market also received good news in the form of a “drop in US oil production on the eve of the biggest coordinated global oil production cut ever.”
The output reductions, if all sides live up to the agreement, will end the price war between Russia and Saudi Arabia and eliminate 20 million crude barrels a day from a market that has been overwhelmed with supply as “stay-at-home” orders issued by governments around the world slashed global demand by 30 million barrels daily.
U.S. crude supplies grew by 8.99 million barrels during the week ended April 24, according to the U.S. Energy Information Administration. Total U.S. inventory stood at 527.6 million barrels, up 1.74 percent from the week prior and 12 percent from a year ago.
At the same time, EIA data showed the amount of crude oil input to refineries fell 3.98 percent to 12.88 million barrels a day.
Also helping investor sentiment was the “positive data” from the study of the drug remdesivir, which has shown promising signs as a COVID-19 treatment — a development that might bring back some of the lost demand for fuel.
“Oil has seen a big momentum change as the possibility of a treatment for COVID-19 means that the global economy can soon reopen and get back to normal,” Flynn said.
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