Oil prices steady after historic crash left market reeling
Oil traders were on the receiving end of some welcome respite this morning as prices firmed overnight after a week of extreme volatility.
After yesterday’s collapse to pre-millenium levels, global benchmark Brent crude continued its rally to rise seven per cent to $21.82.
US standard West Texas Intermediate also firmed up, gaining 10 per cent to reach $15.18, Monday’s selling spree forgotten for the moment.
Both benefited from aggressive words from US president Donald Trump, who said that the US navy should shoot and destroy Iranian gunboats harassing shipping in the Straits of Hormuz.
Fiona Cincotta of City Index said that Trump’s words had the look of an intentional attempt to boost prices:
“There is a distinct whiff of Trump stirring up political tensions to intentionally boost the price of oil.
“Still it appears to have been just the prompt that oil traders needed and WTI has jumped in early trade”.
Oil stocks building “at a pace never seen before”
Prices also benefited from a smaller than anticipated build in US crude inventories, said Bjornar Tonhaugen of Rystad Energy:
“Prices also saw a boost as US crude stocks last week did not build up by the heavy amounts the market believed, as a decent amount of crude exports was still going out of the US Gulf”.
However, he warned that it was clear that build ups would increase further towards the end of April, with US stocks set to surpass record highs of 532m barrels.
Tonhaugen said that demand from US refineries had fallen by 4m barrels per day, forcing prices down, with no upside sentiment yet in sight:
“Oil prices will see continued downwards pressure before long because the physical oil market is building stocks at a pace never seen before.
“The only concrete development that could give prices a boost that can last is either a rebound in demand, when lockdowns are scrapped and industrial activity ramps up, or a generous and unprecedented production cut, in addition to what OPEC+ decided.
“If that doesn’t happen a series of shut-ins is coming, the size of which can shock the market and force supply down in itself”, he finished.