Crude Prices Gain even as US Inventories Grow

Crude oil prices moved higher during the early Asian trade session on Friday. Trader sentiment was lifted by a less than expected growth in U.S. inventory levels as well as supply cuts by the Organization of Petroleum Exporting Countries (OPEC) and non-member allies led by Russia (OPEC +).

These new supply cuts take effect today but oil traders doubt this will be enough as the global demand for oil has cratered thanks to the Covid-19 (coronavirus) pandemic.

As of 12:15 am GMT, the international Brent crude oil futures contract, for front month delivery, added 4.2 percent or $1.10 to trade at $27.58 a barrel. On Thursday, the Brent contract spiked by 12 percent.

The U.S. West Texas Intermediate (WTI) crude oil futures contract, for front end delivery, also rose. This contract was up $1.37 or 7.3 percent to trade at $20.21 per barrel. On Thursday this contract was up 25 percent.

Crude Oil Inventories Rise less than expected in the United States

According to the U.S. Energy Information Administration (EIA), weekly oil inventories in the world’s largest economy rose below market expectations by nine (9) million barrels to 527.6 million barrels in storage. This was well below the expected rise of 10.6 million barrels.

Of note, U.S. shale oil production is dwindling as demand for oil continues to evaporate. U.S. states are starting to ease back on lock down orders but the underlying economic damage to the U.S. economy has been a shock. There are also 26 million unemployed Americans since the peak of the coronavirus outbreak in March.

Oil Traders watch OPEC Oil Production Cuts     

The Organization of the Petroleum Exporting Countries (OPEC) and non-members led by Russia are starting to reduce supply as of today. They are cutting oil production by nearly ten (10) million barrels per day.

With that said, oil traders fear that these cuts in production are far outstripped by the dwindling demand for the black gold as much of the world’s population remains sheltered as the coronavirus is still spreading.