US oil prices extend rally as virus worries ease

US oil prices surged above $17 a barrel Thursday as virus-ravaged markets were lifted by data showing improving demand and a smaller-than-expected rise in stockpiles in the world’s top economy.

US benchmark West Texas Intermediate rose 16.4 percent to $17.53 a barrel in Asian trade, after jumping by more than a quarter on Wednesday.

Brent crude, the international marker, was up 10.4 percent at $24.90.

Oil prices have plunged to historic lows in recent weeks as collapsing demand caused by worldwide lockdowns prompted a massive glut and led to storage capacity filling up.

Prices fell heavily at the start of the week, but began rebounding Wednesday after data from the US Energy Information Administration showed that crude stockpiles in the world’s biggest economy rose by about nine million barrels.

That was below market expectations of an increase of 11.7 million barrels, according to analysts.

There were also signs that demand may be improving with weekly gasoline supplied rising by 549,000 barrels a day, the most since May last year, Bloomberg News reported.

Edward Moya, senior market analyst with OANDA, said the bounce in prices came as traders bet that “demand will continue to improve and as global production levels are forced lower as storage capacity runs out”.

He added that prices would “continue to play ping-pong here, but continued optimism on the virus front will do wonders, improving both economic activity and crude demand forecasts”.

A deal by top producers to cut output by almost 10 million barrels is also due to come into effect from Friday.

There have been signs that some countries have already started slashing production in line with the agreement, lending further support to prices.

The crude market rally tracked advances on Asian bourses and Wall Street, which were boosted by news that a US company reported positive test results for a drug used in treating the coronavirus.

“The vaccine is incredibly positive news for the oil market as it suggests a quicker recovery in global demand,” said Stephen Innes, chief global market strategist from AxiCorp