Oil jumps 15% after reports that a key measure of storage demand was 2 million barrels lower than expected
- Oil bounced 15% on Wednesday against a backdrop of slowing demand for inventory storage.
- Wednesday's gains came after the American Petroleum Institute reportedly said that US oil inventories rose by just shy of 10 million barrels last week.
- That was significantly lower than the 12 million barrel increase expected by analysts, the Financial Times reported.
- Oversupply fears had seeped into selling pressure on oil-exchange traded funds that have been pulling back from the June contract.
- In morning European trading, West Texas Intermediate oil rose as much as 15% to $14.20 a barrel and Brent rose 3% to $23.43 a barrel.
- Watch oil trade live with Markets Insider.
Oil prices rebounded on Wednesday, after reports that a key measure of oil inventories showed lower than expected demand for storage and oil-focused exchange traded-funds appear to have finished selling June futures contracts.
West Texas Intermediate crude futures rose 15% to $14.20 a barrel in morning European intraday trading. The international benchmark Brent crude rose 3% to $23.43 a barrel.
Wednesday's gains came after the American Petroleum Institute reportedly said that US oil inventories rose by just shy of 10 million barrels last week. That was significantly lower than the 12 million barrel increase expected by analysts, the Financial Times reported. Those figures suggest that storage demand amid the coronavirus is slowing, a likely boost for market sentiment.
The popular oil ETF USO pulled out of its June contract and said it would sell all its futures contracts for oil delivery in June, in favour of longer-term contracts.
The oil market has been in turmoil with mounting hedge fund selling and after prices tanked again by 21% on Tuesday.
Analysts, however, warned that gains are likely to be short-lived, with one predicting "carnage" in the oil market in coming weeks.
"Carnage will remain as long as the market remains so incredibly imbalanced and we get closer to mid-May when storage facilities are expected to be full to the brim," said Craig Erlam, senior market analyst at OANDA. "Those cuts can't come soon enough."
"Oil trade will remain volatile, but any major relief rallies will likely be heavily sold into until the entire energy space starts delivering deeper production cuts," according to Edward Moya, another senior market analyst at OANDA.
"Given that inventory increases are still running at extreme rates we may still be seeing such violent moves in WTI futures without the fund rolls," analysts at Deutsche Bank said.
The US Energy Information Administration's inventory report and the release of global floating storage data later today would be noteworthy.
Read the original article on Business Insider