Oil prices climbed Wednesday after data suggested the U.S. may not run out of space to store its glut of crude as quickly as previously feared.
Against a bleak backdrop for the oil market, American Petroleum Institute data released late Tuesday showed U.S. crude inventories for the week ended April 24 rose by 10 million barrels—falling short of consensus forecasts of an 11.7-million-barrel increase, according to Helge André Martinsen, senior oil market analyst at DNB Markets.
“It’s clear that on a relative basis those figures are supportive of [West Texas Intermediate futures],” Mr. Martinsen said. “It seems like key oil producing states in the U.S. are moving toward production cuts and working from the same agenda.”
June futures contracts for West Texas Intermediate, the main U.S. bellwether, Wednesday climbed 16.3% to $14.35 a barrel. But many traders and tracking funds have shifted their investments to the July contract a little over a week after June became the front-month contract. Those moves represent an attempt by investors to avoid being stung by a repeat of the May contract’s negative pricing last week.
“It’s almost like people see this front-month contract as toxic and nobody wants to own it,” said Mr. Martinsen.
Trading volumes for the June contract have slipped so there is a greater chance of volatility, traders say.
“There’s now greater potential for dislocation in the front month contract versus the rest,” said Edward Marshall, a commodities trader at Global Risk Management.
The better-than-expected U.S. storage figures follow the collapse of global oil markets as coronavirus lockdowns stifle industrial activity and transport.
Photo: David Paul Morris/Bloomberg NewsJuly WTI futures were more popularly traded than June ones on both Tuesday and Wednesday, and those futures were up 7.6% at $18.94 a barrel. Brent crude, the global benchmark, was up 3.7% at $23.59 a barrel.
The better-than-expected U.S. storage figures followed the collapse of global oil markets under the weight of a glut of crude that built-up as coronavirus lockdowns stifled industrial activity and transport. Analysts and oil-watching organizations have cut demand forecasts for April by between 20 million and 30 million barrels a day.
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Oil-producing nations will on Friday implement their agreement made earlier in April to remove 9.7 million barrels of crude, roughly 13% of global supply, from markets. But that won’t be enough to mitigate the hit to demand and the worst has yet to come for crude prices, said Spencer Welch, director of oil markets at IHS Markit.
“I’m afraid I can’t think of a reason to be optimistic and we don’t think markets are at the bottom yet. We think that will come in May,” Mr. Welch said. “Storage inventories are still filling very fast. Tanks will be full.”
Investors will closely scrutinize official storage data due from the U.S. Department of Energy later Wednesday. Participants in a Wall Street Journal poll expect an 11-million-barrel crude build in the most recent week.
—Dan Molinski contributed to this article.
Write to David Hodari at David.Hodari@dowjones.com
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