By Peter Nurse
Investing.com - Oil markets pushed higher Thursday, admittedly to still low levels, amid heightened geopolitical tensions and as producers make attempts to tackle the massive glut of crude.
AT 9:25 AM ET (1325 GMT), U.S. crude futures traded 20% higher at $16.54 a barrel, having fallen into negative territory for the first time on Monday. The international benchmark Brent contract rose 9.4% to $22.29, but has still lost roughly two thirds of its value so far this year.
Helping the move higher was President Donald Trump’s threatening tweet towards Iran on Wednesday, adding some geopolitical risk premium to the price of crude.
Iran, which needs higher oil prices every bit as much as the producers in Texas, was happy to play along earlier Thursday, warning of a “swift response” to any U.S. provocation.
“This ratchets up tensions once again between the U.S. and Iran. However, given the glut we have in the oil market, it is difficult to see this offering lasting support to the market, unless the situation does escalate further,” said analysts at ING, in a research note.
Further evidence of that glut came from Wednesday’s EIA report, which showed U.S. crude inventories rose by 15 million barrels in the week to April 17 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.
There are some signs of hope.
U.S. crude production fell 100,000 barrels per day last week to 12.2 million barrels a day, and Oklahoma’s energy regulator said on Wednesday that oil producers could close wells without losing their leases, suggesting more supply is set to be turned off.
But more is needed to offset the inventory glut, and a significant rebound in demand still looks a long way off.