Oil traded sharply higher on Wednesday, rebounding from a drop to a 21-year low, as a smaller-than-expected weekly climb in U.S. gasoline stockpiles lifted futures prices for the fuel.
Oil prices also got a boost after a tweet from President Donald Trump Wednesday raised tensions with Iran. Trump tweeted that he has “instructed the United States Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea.”
“Trump continues to be active in trying to tweet oil prices higher,” said Edward Moya, senior market analyst Oanda, in a market update. However, “oil will continue to remain heavy on demand fears and will shrug off his latest tweets about filling up the [Strategic Petroleum Reserve] without congressional approval, funding U.S. oil and gas companies, and threats to shoot down any Iranian gunboats that pose a threat.”
U.S. benchmark crude futures settled Tuesday at their lowest since 1999, while global benchmark Brent crude marked an intraday Wednesday dip under $16 a barrel—also the lowest in 21 years, according to FactSet data.
On Wednesday, West Texas Intermediate crude for June delivery
now the front-month contract after the May contract expired on Tuesday, was up $2.76, or 23.9% at $14.33 a barrel. Prices on the New York Mercantile Exchange settled Tuesday around the lowest since February 1999.
June Brent crude
the international benchmark, was trading up $1.28, or 6.6%, at $20.61 a barrel on ICE Futures Europe. At one point, the contract, however, had skidded to an intraday low of $15.98 a barrel in electronic trade, which would have put the contract around its lowest levels since 1999, according to FactSet data, based on the most-active contract.
The trading action comes after Brent prices on Tuesday saw their lowest finish since February 2002 and notched the sharpest daily slide since January 1991, according to Dow Jones Market Data.
A glut of oil and dwindling places to store the commodity has combined to obliterate crude values, highlighted by a stunning 306% decline Monday in the now expired May contract that placed the front-month contract at negative $37.63 a barrel.
On Wednesday, the U.S. Energy Information Administration reported that U.S. crude inventories rose 15 million barrels for the week ended April 17 to 518.6 million barrels, the EIA said. That marked a 13th straight weekly climb and followed a record weekly increase of 19.2 million barrels a week earlier.
Oil stocks at Cushing, Oklahoma, the delivery hub for Nymex futures, rose to 59.7 million barrels last week from 55 million the previous week, according to the EIA.
Analysts polled by S&P Global Platts expected the overall inventory data to show a rise of 12.9 million barrels. The American Petroleum Institute on Tuesday reported a climb of 13.2 million barrels.
“Another large oil build propels us closer to a record oil inventory level, which is now less than 17 million barrels away,” said Matt Smith, director of commodity research at ClipperData. “As refining activity dips to a new 12-year low, the crude build has actually been kept in check by lower oil imports—dropping below 5 million barrels per day for the first time in the weekly data since 1992.”
Meanwhile, gasoline supply edged up by 1 million barrels and distillate stockpiles added 7.9 million barrels, the EIA said. The S&P Global Platts survey had shown expectations for supply increases of 5.7 million barrels for gasoline and 3.7 million for distillates.
The gasoline supply climb was much smaller than expected, but motor gasoline produce supplied over the last four weeks, a proxy for demand, revealed a drop of 41.4% from the same period last year, to average 5.5 million barrels a day, EIA data showed.
May natural gas
traded at $1.914 per million British thermal units, up 9.3 cents, or 5.1%, ahead of a weekly update on stocks of the commodity.
The EIA report Wednesday also showed that domestic oil produced inched lower by 100,000 barrels to 12.2 million barrels last week.
The move comes as some U.S. crude producers have cut production because of the low prices for oil.
“Oil production will fall because it has to fall. U.S. shale producers are already shutting down, laying off workers, and pretty soon [potentially] filing bankruptcy,” said Stephen Innes, global chief market strategist at AxiCorp. “There is no production deal to be had that will change that.”
“The only thing that saves the shale industry is the world economy opening up soon or a virus cure,” he said in a note.