Oil prices rose on Thursday, building on big gains in the previous session on signs the U.S. crude glut is not growing as fast as expected and that gasoline demand battered by COVID-19 restrictions is starting to pick up.
West Texas Intermediate (WTI) crude futures climbed to a high of $16.25 a barrel and were up 7.2%, or $1.08, at $16.14 at 0147 GMT. The U.S. benchmark surged 22% on Wednesday.
Brent crude rose 3.9%, or 88 cents, to $23.42 a barrel in light trading, with the June contract expiring on Thursday. The contract hit a high of $23.65 in early trading, having posted a 10% gain on Wednesday.
The May WTI contract plunged to historic lows below zero last week, but recovered the next day to expire at $10.01 a barrel. The June contract for the U.S. benchmark is now holding above $16 a barrel, and market strategists said while the market is likely to remain volatile, it may have found a floor.
"I think we're closer to an equilibrium price for WTI between $15 and $20. That reflects all of the known knowns - the demand destruction that has led to storage filling up and pending supply cuts," said Michael McCarthy, chief market strategist at CMC Markets and Stockbroking in Sydney.
U.S. Energy Information Administration data on Wednesday showed U.S. crude oil inventories grew by 9 million barrels last week to 527.6 million barrels, well below the 10.6 million-barrel rise analysts polled by Reuters had expected.
U.S. gasoline stockpiles notably fell by 3.7 million barrels from record highs the previous week, with a slight rise in fuel demand offseting a rebound in refinery output. The dual moves hinted of a pick-up in fuel demand that has been smashed by lockdowns to curb the novel coronavirus.
"There are increasing signals that perhaps the worst is behind us," said Lachlan Shaw, head of commodity research at National Australia Bank.
Comments from the Trump administration raised hopes for more supply to exit the market and bolster the output cuts planned by the Organization of the Petroleum Exporting Countries (OPEC) and other major producers. Treasury Secretary Steven Mnuchin said the government was exploring options "to store another several hundred million barrels" of oil.He did not say, though, where the administration might find that storage space. U.S. private storage is already approaching full capacity and the government's Strategic Petroleum Reserve hold only 78 million barrels of spare capacity.