Oil surges towards positive finish after torrid week

SINGAPORE (AFP) – United States (US) oil surged yesterday and headed for a positive finish to a torrid week that saw prices drop below zero, as output cuts and US-Iran tensions lifted coronavirus-ravaged markets.

US benchmark West Texas Intermediate (WTI) for June delivery was up 8.1 per cent at USD17.85 in afternoon Asian trade, after settling 20 per cent higher on Thursday.

International benchmark Brent for June was changing hands at USD22.55 a barrel, up 5.7 per cent.

Oil prices have been hit hard as the virus pandemic strangles demand owing to lockdowns and travel restrictions, with US crude falling into negative territory for the first time on Monday as storage space ran low.

Earlier this month, exporting group OPEC and its partners agreed to cut output by almost 10 million barrels a day from May to shore up markets, bringing an end to a Saudi-Russia price war.

A gas station is pictured in front of Navajo Refining in Artesia, New Mexico. PHOTO: AFP

ANZ said there were signs that oil producers had started cutting production, helping push prices up.

“Kuwait said that it had already started cutting production ahead of the planned May 1 start of the recent OPEC+ supply agreement. Algeria also told OPEC it would be cutting immediately,” the bank said in a note.

There were also signs US output is beginning to fall – the Energy Information Administration said American crude production fell slightly to 12.2 million barrels per day last week.

In addition, tensions in the crude-rich Middle East gave a boost to markets.

After President Donald Trump ordered the US Navy to destroy any Iranian boats that harass American ships in the Middle East, the Islamic Republic’s Revolutionary Guards warned on Thursday of a “decisive response”. The Persian Gulf is a major gateway for oil to reach international markets, and spikes in US-Iran tensions typically drive prices higher. Even though prices are stabilising, they remain at multi-year lows and analysts say that demand needs to pick up again for them to truly recover.

AxiCorp global market strate-gist Stephen Innes said it was “probably rational to temper expectations as it’s going to take more than a celestial alignment to get WTI to stick above USD15 per barrel this month, let alone super tack to USD20”.