By Peter Nurse
Investing.com - Oil markets pushed higher Friday, rebounding after some hefty recent losses, but still on course for their third straight weekly loss as production shutdowns failed to keep pace with sliding demand due to the coronavirus crisis.
AT 9:20 AM ET (1320 GMT), U.S. crude futures traded 4.1% higher at $17.18 a barrel, off an intra-day high of $17.95, while the international benchmark Brent contract rose 1.9% to $21.74.
Despite these gains, prices are heading for their eighth weekly loss in nine, with Brent on course for a loss of over 25% this week and U.S. crude set for a fall of well over 10%. Both blends are still down by over 60% from the start of the year.
Helping the tone Friday is the belief that the Trump administration will come to the aid of the industry in the U.S., despite the potential for political opposition from the Democratic Party.
“One of the components we’re looking at is providing a lending facility for the industry,” Mnuchin told Bloomberg News on Thursday. “We’re looking at a lot of different options and we have not made any conclusions.”
President Donald Trump pledged to make funds available to oil companies on Tuesday, tweeting a promise to ensure “these very important companies and jobs will be secured long into the future.”
In an illustration of the pain in the sector, Continental Resources, the largest oil producer in North Dakota, stopped all drilling and shut in most of its wells in the state's Bakken shale field, Reuters reported, citing people familiar with the situation.
Also affecting the current price action is that retail brokerages have taken action to stop clients building new positions in both benchmarks, while some have also raised margin requirements.
“Given the extreme and unpredictable volatility in the markets, we are taking action to protect our smaller clients and make sure they are aware of the risks they are assuming,” Reuters quoted a spokesman for brokerage INTL FCStone as saying.
Still, any gains are likely to be tenuous as the market remains severely oversupplied, prompting worries about a lack of storage space.
Wednesday’s EIA report showed U.S. crude inventories rose by 15 million barrels last week to 518.6 million barrels, the fourth consecutive week where inventories have grown by more than 10 million barrels, and close to the all-time record of 535 million barrels set in 2017.
Additionally, China has a total of 1,300 million barrels in commercial and strategic crude inventory, according to Sanford Bernstein, and will struggle to maintain current import levels without exceeding this storage capacity. It thus expects the market to stay oversupplied in the second quarter of this year.
Separately, Russian news agencies reported that the country kept its oil output unchanged through last week, rather than accelerate cuts agreed with OPEC and others earlier in the month. Those cuts are scheduled to start in May.