MELBOURNE (Reuters) – U.S. crude oil futures opened 5% higher on Thursday, reversing Wednesday’s losses, despite growing concerns about a looming economic depression due to the coronavirus pandemic.
U.S. West Texas Intermediate (WTI) crude CLc1 futures rose as much as $1.16 to a high of $21.47, and were up 4.8%, or 97 cents, at $21.28 as of 2302 GMT.
The market bounced slightly following a drop on Wednesday after U.S. crude stockpiles rose 13.8 million barrels in their biggest weekly increase since 2016. Brent futures LCOc1 slid 6% on Wednesday. [nL1N2BP121]
Analysts expect more of the same in coming weeks as refiners take in less crude, with gasoline and jet fuel demand plummeting. Gasoline demand suffered its biggest weekly drop ever as economic activity has dropped due to the coronavirus pandemic, U.S. Energy Information Administration data showed.
Research firm Rystad Energy estimates global crude oil demand in April will fall nearly 23% year on year to 77.6 million bpd.
U.S. crude futures appear to have found some technical support around the $20 mark, CMC Markets chief market strategist Michael McCarthy said.
Wednesday’s rise could also be due to traders switching from Brent to WTI, closing a persistent discount between the two crudes, on a view that high-cost U.S. shale producers may have to cut production, he said.
“High debt levels could see some of those producers wiped out,” McCarthy said.
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