By Adedapo Adesanya
It was a good day for crude oil on Wednesday, April 29 as prices rose more than 25 percent due to slowing demand for inventory storage, and news of successful early testing of a drug to treat coronavirus.
Brent crude gained $2.29 or 11.27 percent to trade at $22.75 per barrel, while the US West Texas Intermediate (WTI) crude gained $3.05 or 24.75 percent to trade at $15.39 per barrel.
Positive news came after the American Petroleum Institute (API), which said that US oil inventories rose by just 10 million barrels last week. That was significantly lower than the 12 million barrel increase expected by analysts.
The news of falling inventory spurred the market up because such figures suggest that storage affected by the coronavirus is slowing, one of the boost that drives traders.
Another news that helped prices up was when biotechnology company, Gilead, announced a key step in creating a treatment for coronavirus.
It was revealed that the antiviral drug named remdesivir is being tested in several ongoing trials of COVID-19 patients. Gilead stated that one of these studies, run by the US National Institutes of Health, showed that the drug works.
Although the company didn’t provide additional data on the drug, market sentiments for such good news pushed prices up.
Analysts, however, warned that gains are likely to be short-lived, as bigger problems like demand worries and oversupply still persists despite gradual easing of lockdowns. For instance, people cannot travel yet and one of the major source of fuel demand are the airlines.
Oil storage still remains a concern, and facilities could reach maximum capacity in a just a few weeks.
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Meanwhile, Black April is wrapping up today. From tomorrow, the 10 percent cut of global supply by 9.7 million barrels per day will kick in.
OPEC+ members like Saudi Arabia, Kuwait and others have started to cut production ahead of the May 1 start date to help ease storage concerns.
Nigeria, which has been struggling to sell its oil even at $10 a barrel, will ship the lowest volume of its key Qua Iboe crude grade since 2016 in May and June.
Co-chair of alliance, Russia, will also cut output by about 19 percent, the country’s Energy Minister, Mr Alexander Novak disclosed on Wednesday.
While the size of the OPEC cut is welcomed, demand has fallen even more and storage for all unused are running out and this might see volatility in prices of the commodity.
To add to the gloom, credit rating agency, Moody’s, cut its oil price assumptions on Wednesday because of a global recession weighing on fuel demand and said it expected ample oil supply in storage to keep prices low through 2021.
