Oil prices jumped on Friday, extending the previous session’s gains, buoyed by a lower-than-expected gain in U.S. crude inventories and the start of output cuts in a bid to offset a slump in fuel demand triggered by the coronavirus pandemic.
Brent crude for July delivery, which started trading on Friday as the new front-month contract, was up $1.10, or 4.2%, at $27.58 a barrel. Brent gained 12% on Thursday.
U.S. crude for June delivery climbed $1.37, or 7.3%, to $20.21 a barrel, having gained 25% in the previous session.
“This is a second straight week of inventory and product demand figures suggesting a bottoming of the U.S. market,” said by the analyst.
U.S. Energy Information Administration data showed crude inventories rose by 9 million barrels last week to 527.6 million barrels, less than the 10.6 million-barrel rise analysts had forecast in a poll.
The other significant support factor on Friday was the official start of output cuts agreed between the Organization of the Petroleum Exporting Countries (OPEC) and other major producers like Russia – a grouping known as OPEC+ – to counter sliding demand.
“OPEC+ quotas are due to kick in on Friday, suggesting short-term supply conditions have likely peaked,” sources said.
The OPEC+ deal covers a cut in production of nearly 10 million barrels per day (bpd), a record level.
That, nevertheless, falls well short of the roughly 30 million bpd of demand that has evaporated amid the coronavirus pandemic as much of the world’s population remains under some form of economic and social lockdown.