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Crude Oil Rises on Virus Drug Trial, Lower Rise in Inventories

Commodities Apr 29, 2020 10:52AM ET
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By Peter Nurse and Kim Khan

Investing.com - Oil markets headed higher Wednesday, rebounding as positive news from trials of a potential treatment for the Covid-19 virus fostered hopes of a quick rebound in fuel demand from the travel and leisure sector. 

Gilead Sciences (NASDAQ:GILD) said it was "aware of positive data"  emerging from the National Institute of Allergy and Infectious Diseases’ study of its antiviral drug remdesivir for the treatment of Covid-19. The company said results showed it benefited patients who took the drug at an early stage of the illness, although later-stage patients responded less.

In addition, a smaller than expected rise in U.S. oil inventories of 9 million barrels took some pressure off the front-month contracts, which has seen selling from dwindling storage space for crude.

“It appears like curves are being flattened everywhere and the curve on crude stocks’ build is the latest to experience this phenomenon, declining from the previous week’s 15-million-barrel jump,” Investing.com analyst Barani Krishnan said.

At 10:45 AM ET (1405 GMT), U.S. crude futures traded 34% higher at $16.59 a barrel, while the international benchmark Brent contract rose 8.6% to $24.70.

In the U.S., the world’s largest consumer of crude, an increasing number of U.S. states start reopening their economies as the administration ramps up the number of virus tests available, and this is being matched in Europe.

This is helping the market rebound, to a degree, after losing more than a quarter of its value over the past two days amid concerns prices may again drop below zero and as investors and a major fund exited the June contract - there were 318,000 open positions as of Tuesday, with 15 sessions left before expiration. May WTI had 610,000 at the same point before expiry.

But oil inventories rose by a beleow-trend 9 million barrels for the week ended April 24, the EIA said. That compared with expectations for a build of about 10.6 million barrels, according to forecasts compiled by Investing.com and down from an average of about 16 million barrels in the past few weeks.

Gasoline inventories unexpectedly sank by 3.7 million barrels, versus forecasts for a rise of about 2.5 million barrels. Distillate stockpiles rose by 5.1 million barrels, compared with expectations for a build of about 3.6 million barrels.

Stockpiles at the Cushing, Okla. hub rose by 3.7 million barrels versus 5 million the week before.

“That’s a relief of sorts for anyone watching the Cushing numbers to guess on how long it takes before the hub runs out of space altogether for physical WTI deliveries,” Krishan said.

“On production, the other big number everyone’s been looking out for, we have a 100,000-barrel-per-day decline, putting us finally at 1 million barrels from the record high 13.1 bpd in mid-March,” he added. “It’s still a pretty slow retreat but it’s the best we have for now, given how the EIA estimates these things.”

The headwinds to physical demand were visible in the latest U.S. economic data. Gross domestic product data showed the U.S. economy contracted by 4.8% in the first quarter. Shorter-cycle data strongly suggest that the second quarter is going to be even worse. 

But market forces are exerting ever-greater pressure on producers. China’s three biggest state producers have announced they will slash their spending plans this year by a combined $19 billion, in the latest sign companies are having to take drastic measures to weather the crash in demand and prices.

Production cuts both inside and outside of the OPEC+ bloc are widely expected to help restore some kind of balance to the market in due course. Analysts at Morgan Stanley (NYSE:MS) said Wednesday they see WTI stabilizing at around $40 a barrel in 2021, with Brent around $5/bbl higher.

Crude Oil Rises on Virus Drug Trial, Lower Rise in Inventories
 

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Comments (10)
Charles Kao
ckao Apr 29, 2020 2:54PM ET
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Unlike water faucet that just turn counter clockwise ?
rr bonne
rr bonne Apr 29, 2020 1:04PM ET
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oil rises on drug trial? even after 2 false positives? I guess if you jump at everything that you will be right eventually (monkey & typewriter again).storage was gobbled up slower than expected? hmm. even my non-industry expertise gut common sense tells me only because idiots are out and about more than anticipated because they know there is no enforcement of any stay at home in most cases and oil being used up more.so, ok to ease stay at home and business restrictions because the curve is flattening AT ITS HIGHEST LEVEL OF KNOWN CASES/DEATHS!? ok, when the virus hits back with a vengeance BECAUSE THERE IS NO VACCINE PEOPLE, then be prepared for YEARS not months of this! just remember... THE VIRUS DON'T CARE!
Cristian Chibato
Cristian Chibato Apr 29, 2020 11:21AM ET
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lmao literally everyday I think I've seen the max level of stupidity these markets can possibly achieve and everyday they outdo themselves
Mugen Cow
Mugen Cow Apr 29, 2020 11:15AM ET
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People are greedy, they only focus on fake news rather than real GDP data.
FED TrumpTweet Pillow
FED TrumpTweet Pillow Apr 29, 2020 11:15AM ET
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who cares about gdp?
Shujaat Abbasi
Shujaat Abbasi Apr 29, 2020 11:15AM ET
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What you think oil will rise more or fall??
Thomas DeVito
Thomas DeVito Apr 29, 2020 11:08AM ET
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If it is offshore it doesn't exist lol
perplexed76 .
perplexed76 . Apr 29, 2020 11:06AM ET
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people "unexpectedly" tried to buy more cheap gasoline.
Barani Krishnan
Barani Krishnan Apr 29, 2020 11:06AM ET
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Many probably drove to the gas station, filled up, got groceries -- and promptly retuned home! :)
Notto Vichy
Notto Vichy Apr 29, 2020 11:00AM ET
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New High ❤️
Kevin Geraldy
Kevin Geraldy Apr 29, 2020 11:00AM ET
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False hope, the leisure/tourism wont recover until everyone on earth got vaccinated
Thomas DeVito
Thomas DeVito Apr 29, 2020 11:00AM ET
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Travel might bounce, but business travel won't and that is what those industries need for their base income.
Eda Mucha
Eda Mucha Apr 29, 2020 11:00AM ET
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haha who’d like to travel if there’s no cure yet?!
Thomas DeVito
Thomas DeVito Apr 29, 2020 11:00AM ET
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Eda Mucha  Young people who don't care. Old people that want to travel before they die anyways.
stan hoon
stan hoon Apr 29, 2020 10:48AM ET
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Total nonsense for oil traders to push crude higher on Giliead trial. The drug is not a vaccine so in the 2nd wave of Covid-19 only 25,000 die in America due to this drug not 55,000 - how does that boost travel and leisure and hence oil use is beyond comprehension.Dead cat bounce and misplaced hope in both the oil price and stock rebound today!
Large Father
Large Father Apr 29, 2020 10:48AM ET
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I KNOW - what is wrong with the American public?!!
titirisca aurelian
titirisca aurelian Apr 29, 2020 10:48AM ET
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it is not the public. the big players as etf, maybe fed...are doing the games.
Gershom Zvi
Gershom Zvi Apr 29, 2020 10:48AM ET
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The real boost for crude They found some space for oil storage
Liam Holland
Liam Holland Apr 29, 2020 10:48AM ET
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For how long the issue remains the same no where to store it everywhere in lockdown U.S have over a thousand deaths a day and they they let's openen back up haha crazy
ADX Line
ADX Line Apr 29, 2020 10:48AM ET
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Why are you so convinced that there will be lockdowns again when there is a 2nd wave? Maybe the world will do what you are not expecting. Maybe the world will be better prepared and more observant and handle pretty much every aspect of this better. The world can't do any worse then what it did on wave one. Maybe just maybe no lockdowns on the 2nd wave. Maybe consider that.
stan hoon
stan hoon Apr 29, 2020 10:48AM ET
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Total nonsense for oil traders to push crude higher on Giliead trial. The drug is not a vaccine so in the 2nd wave of Covid-19 only 25,000 die in America due to this drug not 55,000 - how does that boost travel and leisure and hence oil use is beyond comprehension.Dead cat bounce and misplaced hope in both the oil price and stock rebound today!
John Laci
John Laci Apr 29, 2020 10:48AM ET
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Stan hoon you’re absolutely right. The GDP went down as worst as 2009, but this drug company made the stock rally
 
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