Promising Virus Treatment Trials Cause Big Surge In Crude Prices

Meanwhile, further output cuts are expected from U.S. and Norway: File Image/PixaBay

Growing optimism for world economies re-opening sooner than expected - this time boosted by strong results of a coronavirus treatment trial - caused crude prices on Wednesday to jump by more than 20 percent, despite news of a 4.8 percent contraction for U.S. GDP in the first quarter - the largest contraction since the financial crisis.

West Texas Intermediate surged by $2.72 to settle at $15.06 per barrel, while Brent gained $2.08 to settle at $22.54 per barrel.

This came on the heels of the disclosure from Gilead that early results of its coronavirus drug trial showed that at least 50 percent of patients treated with a five-day dosage of antiviral drug remdesivir improved and more than half were discharged from the hospital within two weeks.

Prices also benefited from Energy Information Administration data showing that crude stockpiles rose by 9 million barrels for the week ending April 24, lower than the 11.7 million barrel build expected by analysts.

More good news came in the form of U.S. production fallingl by 100,000 barrels per day (bpd) last week to 12.1 million bpd, or 1 million bpd below the record 13.1 million bpd production set during the week ending March 13.

Bjornar Tonhaugen, global head of oil markets at Rystad Energy, remarked, "Expect a lot of volatility and price swings either way in coming days as bullish and bearish traders weigh their hopes and fears in a market that is desperate to find something to hang on."

As for the argument from critics that more output needs to be cut internationally in order to bring inventories more in line with the collapsed demand triggered by government lockdowns in response to the coronavirus, Rystad Energy also announced that six major U.S. shale producers are expected to shut some 300,000 bpd of crude for the months of May and June: Continental Resources, Cimarex Energy, ConocoPhillips, PDC Energy, Parsley Energy and Enerplus Corporation.

Not to be outdone, Tina Bru, energy minister for Norway, which is Western Europe's largest oil producer, said "We will cut Norwegian production by 250,000 bpd in June and by 134,000 bpd in the second half of 2020. In addition, the start-up of production of several fields will be delayed until 2021

"Consequently, the total Norwegian production in December 2020 will be 300,000 bpd than originally planned by the companies."

Of course the real solution to oil's problems would be a resurgence of demand due to the lifting of lockdowns, and on that score Wednesday saw an unusual amount of positive news regarding an end to the virus scare, with Dr. Anthony Fauci, Washington's top infectious-disease expert, saying with regards to remdesivir, "It's really opening the door to the fact that we now have the capability of treating, and I can guarantee you, as more people, more companies, more investigators get involved, it's going to get better and better."

Meanwhile, Oxford University, which has begun testing a potential coronavirus vaccine in humans, reiterated that the drug has already enjoyed success in rhesus monkeys and could be ready if all goes well for worldwide distribution in September.

On the other side of the Atlantic, Florida became the latest state to reopen restaurants and shops, with governor Ron DeSantis telling media his administration's measured approached to the pandemic compared to the heavy-handed shutdowns experienced throughout North America has served his state well.

He said, "We know who the vulnerable populations are; if you look at the statistics for people under 50 who don't have chronic conditions, I mean, you have an extremely low chance of death from this virus and those situations.

"We know how to protect folks and social distance between those two groups and so, I think there's a lot of things we've learned over the last six weeks."