Oil Prices Jump More than 20% as Economies Reopens

• Oil Prices Jump More than 20% as Economies Reopens

Global oil prices sustained bullish run on Thursday during Asian trading session as data showed that the US crude inventories eased last week as well as the hope that global economies are reopening for business.

The international oil benchmark, Brent crude, against which Nigerian oil is priced gained 20 percent or $4 from $21.51 per barrel it traded on Wednesday to $26.63 per barrel on Thursday before settling at $25.81 as at the time of writing.

While the US West Texas Intermediate oil for June delivery rose by about 30.04 percent or $3.72 from $13 a barrel it traded on Wednesday to $16.72 per barrel on Thursday.

Oil prices took off on Wednesday on optimism that several economies announcing reopening strategies or dates for partial trading activities would drive demand for the commodity. Demand for crude oil had dropped by more than 30 million barrels per day in April following a series of lockdowns in key oil markets due to coronavirus pandemic.

“Oil prices rose on Wednesday morning as traders cling to potentially positive indications that the demand-supply gap may somewhat become smaller soon,” Rystad Energy’s global head of oil markets Bjornar Tonhaugen told CNBC.

It should be noted that the news that Remdesivir drug that was reported effective on COVID-19 could further boost oil prices after the Food and Drug Administration approval.

“Overall we need official announcements for cuts or economies reopening for prices to stabilize. Expect a lot of volatility and price swings either way in coming days as bullish and bearish traders weigh their hopes and fears in a market that is desperate to find something to hang on,” Tonhaugen added.

Last week, US oil price declined below zero as data showed oil inventories rose to a recorded-high despite the fall in global demand. However, data released by the U.S. Energy Information Administration for the week ended April 24 revealed that oil inventories rose by 9 million barrels, below the 11.7 million barrels predicted by experts.

Accordingly, crude oil production declined by 100,000 per day during the week to 12.1 million barrels per day, down from 13.1 million bpd recorded in the week ending March 13.

This declined in oil production coupled with optimism that economies will reopen soon boosted prices on Wednesday and Thursday.

It should be noted that the news that Remdesivir drug that was reported effective on COVID-19 could further boost oil prices after the Food and Drug Administration approval.