Oil prices rebounded and stocks across Asia entered a bull market on hopes that a glut in global crude markets caused by the coronavirus pandemic may be easing.
In early Asia trading on Wednesday, West Texas Intermediate, the US crude oil benchmark, climbed more than 13.7 per cent to $14.03 after the American Petroleum Institute, an industry group, reported that oil inventories increased by less than 10m barrels in the week ended April 24. Analysts polled by Bloomberg had forecast a rise of 12m barrels.
The US oil benchmark has been rocked in recent weeks by a coronavirus-driven collapse in demand and a lack of storage in the key delivery hub of Cushing, Oklahoma. That drove prices into negative territory last week for the first time in history. On Tuesday, WTI fell by as much as a fifth due to concerns over storage capacity.
Brent crude, the international benchmark that has also been pummeled in recent weeks, was up 3.8 per cent at $21.23 a barrel on Wednesday.
API figures showed that inventories at Cushing rose by almost 2.5m barrels last week.
Warren Patterson, head of commodities strategy at ING, said investors would be looking to more widely followed inventory readings from the US Energy Information Administration to be published later on Wednesday. “If the EIA numbers for Cushing are similar to those from the API, it will be the smallest build since mid-March at the WTI delivery hub,” he added.
On Wednesday, analysts at Moody’s forecast an uptick in global demand for oil in the second half of 2020. The rating agency expects prices for Brent and WTI to average $35 and $30 a barrel respectively this year. It warned that “pick-up in demand, combined with storage limitations, implies that inventory drawdowns will be slow”.
Signs of optimism in oil markets bled over into global equities. Australia’s S&P/ASX 200 added 1 per cent, South Korea’s Kospi rose 0.6 per cent and Hong Kong’s Hang Seng was up 0.2 per cent. China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks rose 0.4 per cent.
Japan’s market is closed for a public holiday.
The gains pushed the widely followed MSCI Asia Pacific index 20 per cent up from its recent lows, meeting the technical definition of a bull market.
Futures markets pointed to gains of 1 per cent for US stocks when Wall Street opens later on Wednesday. The benchmark S&P 500 closed 0.5 per cent lower overnight.
Investors face a packed schedule for the day, including an interest rate decision from the US Federal Reserve and a first-quarter GDP reading for the world’s biggest economy.