Oil prices showed signs of recovery Wednesday morning, modestly reversing some of the losses posted this week after storage in the U.S. rose less than expected.
There are hopes that demand will go up as a couple of countries in Europe and some U.S. cities prepare to ease coronavirus lockdowns. U.S. West Texas Intermediate (WTI) crude rose to a high of $14.40 per barrel, up by 15.4% or $1.90 at 03:33 West African Time.
The gain reduced the 27% fall it recorded in the first two days of the week.
Brent Crude, the benchmark for Nigeria’s oil grades, went up by 4.6% or 93 cents to $21.39 a barrel, further increasing the 2.3% gain posted on Tuesday.
But Financial Times reported Wednesday morning that the Nigerian National Petroleum Corporation was now offering cargoes of Bonny Light and Qua Iboe, two of Nigeria’s main grades, at nearly $4 per barrel below Dated Brent, or close to $10.
The crude inventories of the U.S. expanded by 10 million to 510 million barrels in one week to 24th April according to American Petroleum Institute compared to experts’ forecast of a 10.6 million build.
“It’s a little bit of good news that maybe storages aren’t filling quite as quickly in the U.S. as you would have thought,” said Lachlan Shaw, Head Commodity Research at National Australia Bank.
Regulators in Texas, U.S. biggest oil producer, are expected to vote on 5th May regarding whether to pursue an output cut. Officials in Oklahoma and North Dakota are also considering how to legally allow output cut.
It will increase production cuts of about 10 million barrels per day agreed by the Organisation of the Petroleum Exporting Countries and its Russia-led allies, or around 10% of world production expected to come into force on 1st May.
“The other thing coming through is more detail and a louder groundswell towards plans for removing COVID restrictions, particularly in Europe — in countries like Spain, France, Austria and Switzerland. That’s going to see demand pick up,” Mr Shaw said.
Credit rating agency, Moody’s reviewed its oil price forecast downward on Wednesday, projecting that the WTI would average $30 a barrel in 2020 and $35 in 2021 due to a global recession affecting fuel demand.
Moody’s said it envisaged abundant oil supply in storage to keep prices low through 2021.