Oil Futures Advance Wednesday

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude on Intercontinental Exchange settled higher Wednesday. The U.S. crude benchmark surged 19%, albeit from a low baseline, amid emerging signs global demand destruction may have bottomed earlier this month. Several countries and regions have begun taking the first steps in easing social distancing guidelines and restrictions on mobility.

Data released Wednesday by the Energy Information Administration showed gasoline supplied to the U.S. market moved higher for a second week through April 17, up 230,000 barrels per day (bpd) to 5.311 million barrels (bbl) last week, which compares with 5.065 million bpd in late March, early April, while inventories increased 1 million bbl versus 2.8 million bbl estimated by the market.

NYMEX May RBOB futures surged 12.81 cents or 28% to settle at $0.6384 gallon, moving off a one-month spot low $0.4738 gallon. NYMEX May ULSD futures settled fractionally higher at $0.7311 gallon, reversing off an 18-year spot low at $0.6725 gallon.

NYMEX June West Texas Intermediate futures advanced $2.21 to settle at $13.78 bbl, shrugging off another large crude build for the fourth week in a row, up 15 million bbl last week. ICE June Brent futures settled up $1.04 at $20.37 after trading early in the session at a $15.98 21-year low on the spot continuous chart.

Wednesday's move higher was also underlined by earlier comments from Russian Energy Minister Alexander Novak suggesting global fuel demand likely found a bottom this month. He cautioned, however, markets would remain volatile before the OPEC+ deal reducing production 9.7 million bpd takes effect on May 1.

Demand recovery remains on an uncertain path, according to Bank of America Global Research Team, due to the sudden nature of that shock as supply reduction will likely happen in stages.

"Our commodity team now projects a 9.2 million barrel per day average year-on-year collapse in oil consumption in 2020, as opposed to the 4.4 million barrel per day drop that we initially projected. As a result of steep and immediate demand collapse, the impact of the OPEC+ deal on the global oil balances could take a while to work through."

WTI futures also found support on reports Saudi Arabia would divert oil en route to the U.S. Gulf Coast away from the United States if the U.S. were to apply tariffs on Saudi crude shipments.

TankerTrackers.com Inc. said Wednesday there are 24 very large crude carriers with a combined 50.4 million bbl of Saudi crude oil headed to the United States with deliveries spread out over 48 days. TankerTrackers.com tweeted the information in response to a tweet from U.S. Sen. Ted Cruz, R-Texas, stating, "Saudis: TURN THE TANKERS THE HELL AROUND."

Oklahoma Corporation Commission, the state's energy regulator, on Wednesday ruled in favor of a statewide production cut of 20% because of the saturated market, classifying unprofitable oil barrels as "economic waste."

At the Cushing hub in Oklahoma, oil storage inventories increased for a seventh straight week, soaring 4.776 million bbl to a nearly three-year high at 59.741 million bbl. As of April 17, supply at the hub, the delivery location for the WTI contract, reached 76% of working capacity, up 22% over the past four weeks. Reuters reported 100% of Cushing capacity is under contract, with storage seen reaching capacity by mid-May.

A day earlier, Texas oil regulators postponed a vote on 20% mandatory curbs in the Lone Star State to May 5 as they seek legal counsel from the state's attorney general. North Dakota regulators ruled against mandating production cuts, saying crude output in the state has already declined over 20% due to unfavorable market.

"I think it a bridge too far at this point," said Lynn Helms, director of the state's North Dakota Department of Mineral Resources.

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

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