Oil extends gains, but still under pressure from virus

Oil extended gains Thursday after a massive rebound overnight, but prices remain under pressure as the coronavirus strangles demand and storage facilities fill up.

US benchmark West Texas Intermediate was up 3.5 percent at $14.27 a barrel while international benchmark Brent crude was up 2.60 percent at $20.90 a barrel in early Asian trade.

Markets were relatively calm compared to the rollercoaster sessions earlier in the week, which saw US crude fall into negative territory for the first time.

Oil markets have plunged in recent weeks as lockdowns and travel restrictions to fight the coronavirus around the world batter demand, and storage facilities are overwhelmed by excess supply.

WTI for June delivery jumped 19 percent Wednesday after US President Donald Trump threatened to shoot at Iranian boats in a key waterway for crude shipments after Washington accused its arch-foe of harassing its ships in the Gulf.

The Gulf is a major gateway for oil to reach international markets, and previous spikes in tensions between US and Iranian vessels have seen crude prices similarly surge higher.

Trump’s threat overshadowed a weekly US inventory report that showed another big jump in crude stockpiles, including at the Cushing, Oklahoma hub where analysts say there is little remaining space.

And analysts warned that geopolitical tensions won’t have a lasting impact if crude storage facilities are full.

“Any bottoming out in prices is solely dependant on either an immediate OPEC+++ coordinated action to limit the downside slide and or an unlikely swift demand recovery in May,” said Stephen Innes, chief global market strategist at AxiCorp.

He was referring to exporting group OPEC and its allies, who struck a deal earlier this month to cut output by 10 million barrels a day in a bid to boost virus-hit markets.

But analysts say that will not be enough to make up for the loss in demand caused by the virus, and prices have continued to fall.