The price of key U.S. benchmark West Texas Intermediate shot up 18 percent in early trading this morning as new reports emerged suggesting that the United States would not fill its storage as quickly as previously anticipated. Brent crude also saw a boost, climbing by 4 percent.
Storage concerns have been the focal point for analysts and traders in oil markets for the past couple of months. The situation has become so dire, in fact, that across the globe, crude-carrying vessels are trapped at sea as storage facilities reach their capacity.
Given the situation, it's clear to see how any piece of remotely positive news could help lift oil prices. And though the American Petroleum Institute reported yet another massive inventory build yesterday, it was significantly less than expected.
Previous API estimates anticipated a build of 13.226 million barrels of oil, while the actual number came out to 10.619 million barrels. That near-three million barrel difference is huge for the market, giving it that much more wiggle room as the industry scrambles to find solutions to the looming meltdown it is faced with.
In addition to the sliver of hope inspired by the API report, OPEC and its global partners are expected to kick off their historic joint oil production cut at the beginning of May. And while the cut may not be enough to counter the some 30-million barrels per day in demand destroyed by the ongoing COVID-19 stay-at-home orders, it is at least a step in the right direction as the world grapples with where to put all the oil that is continuing to flood into the market.
Despite the 'good' news, however, many analysts still see more destruction in the weeks to come.
Craig Erlam, senior market analyst at OANDA explained, "Carnage will remain as long as the market remains so incredibly imbalanced and we get closer to mid-May when storage facilities are expected to be full to the brim," adding "Those cuts can't come soon enough."
Though the WTI has dragged itself out of negative territory, Canada is still feeling the full weight of the crisis, with its key benchmark, Western Canadian Select, sitting at -$3.06 per barrel.
By Michael Kern for Oilprice.com
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