Oil prices rise on early signs of pick up in fuel demandOil prices rise on early signs of pick up in fuel demand
FILE PHOTO: FILE PHOTO: An oil pump jack pumps oil in a field near Calgary

By Noah Browning

LONDON (Reuters) – Oil prices jumped on Thursday, lifted by signs that the U.S. crude glut is not growing as quickly as expected and of a rise in fuel demand, which has been crushed by the coronavirus.

West Texas Intermediate (WTI) crude futures climbed to $17.11 a barrel, up 13.6% or $2.05 at 0840 GMT. The U.S. benchmark surged 22% on Wednesday.

Brent was up 7.6%, or $1.71 at $24.25 a barrel in light trading, with the June contract expiring on Thursday, having posted a 10% gain on Wednesday.

U.S. crude inventories grew by 9 million barrels last week to 527.6 million barrels, U.S. Energy Information Administration data showed, well below the 10.6 million-barrel rise analysts polled by Reuters had expected.

U.S. gasoline stockpiles fell by 3.7 million barrels from record highs the previous week, with a slight rise in fuel demand offseting a rebound in refinery output.

“If we see a continuation of this trend in the coming weeks, it could suggest the worst might be behind the oil market,” ING’s head of commodities strategy Warren Patterson said.

Adding to positive sentiment, China Petroleum & Chemical Corp (Sinopec) said on Thursday its daily sales of refined oil products have risen to more than 90% of levels seen before the coronavirus outbreak.

However, storage concerns continued to weigh on markets with the International Energy Agency warning that global capacity could reach its maximum by mid-June and that energy demand could slump by a record 6% in 2020 due to lockdowns.

“If the already-stretched storage capacity is getting fuller and fuller every week, a rise in prices cannot be sustainable for long as the problem is not really resolved”, said Rystad Energy’s head of oil markets Bjornar Tonhauge.

“At around 80-90% full, traders keep on seeing the storage glass as half empty when it is not even half full. It’s close to overflowing, even at a lower speed.”

U.S. President Donald Trump said his administration will soon release a plan to help the country’s oil companies, which Treasury Secretary Steven Mnuchin said could include adding millions of barrels of oil to already-teeming national reserves.

Meanwhile, Western Europe’s largest oil producer Norway said it will slash its output from June to December of 2020, the first time in 18 years it has joined other major producers to shore up prices.

(Additional by Sonali Paul in Melbourne and Koustav Samanta in Singapore; Editing by Tom Hogue, Richard Pullin and Alexander Smith)