WTI, Brent Futures Surge Thursday

WASHINGTON (DTN) -- Nearby-delivery West Texas Intermediate futures on the New York Mercantile Exchange rallied in afternoon trade Thursday, with June Brent crude on the Intercontinental Exchange expiring at 1-1/2 week high as major oil producers stand ready to cut 9.7 million barrels per day (bpd) of output with the start of a production agreement Friday.

The U.S. crude benchmark has now advanced in five of the past seven sessions, with June WTI settling the session $3.78 or 23% higher at $18.84 barrel (bbl), outpacing the gain in the July contract by $1.05, with the prompt contango settling at $3.01 bbl. June Brent futures expired up $2.73 at $25.27 bbl, with the July contract rolling into the front month position at a $1.21 premium to the now-expired contract with a $26.48 settlement.

NYMEX May ULSD futures expired 3.74 cents higher at $0.7319 gallon, with June ULSD futures widening its premium to the now-expired contract 1.87 cents to 10.12 cents with a $0.8331 settlement. May RBOB futures expired down 2.94 cents at $0.6978 gallon after reversing lower from a $0.7960 six-week high on the spot continuous chart, while the June contract advanced 2.92 cents for a $0.7837 gallon settlement.

Organization of the Petroleum Exporting Countries, Russia, and nine other non-OPEC oil producers have agreed to reduce their production by 9.7 million bpd beginning Friday, with some countries having already cut their output ahead of the start to the agreement amid a widening supply glut.

The urgent nature of reducing global supply comes amid a collapse in demand, as the global COVID-19 pandemic shut down large swaths of the world economy. The damage is filtering in recent economic data, with U.S. and Eurozone economies contracting sharply in the first quarter, data released this week shows. Economists and politicians alike warn the worst of the recession is yet to be seen in the second quarter as major global economies went into full lockdown in April.

In the United States, data released this morning showed initial unemployment claims surged another 3.389 million for the week ended April 25, at the high end of expectations, bringing the total number of first-time claims to 30.3 million over the most recent six week period.

Against this bearish backdrop, oil futures found support in end-month trading on early indications the worst may have passed, with British Prime Minister Boris Johnson indicating Thursday the country has seen the peak in infections. Johnson himself was infected with COVID-19 and placed on a respirator earlier this month.

In the United States, gasoline demand has increased from a 5.065 million bpd nadir at the start of April to 5.86 million bpd last week, while states begin to open their economies.

Liubov Georges can be reached at liubov.georges@dtn.com

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