U.S. West Texas Intermediate crude oil futures jumped more than 8% in a surprise move just ahead of the end of the regular trading session
Traders said the catalyst behind the surge in prices was a report from Bloomberg that the oil minister of Algeria said OPEC and its allies, known as OPEC+, was discussing a massive cut that could reach 10 million barrels per day.
Oil Fund Trading Halted
The excessive volatility fueled by the bombshell news forced regulators to shut down the United States Oil Fund (USO), which tracks the price of oil. The halt in trading was necessary due to wild activity into the end of the session. The ETF resumed trading shortly after the initial halt.
US Crude and Fuel Stocks Soar as Demand Craters Due to Pandemic
U.S. crude oil stockpiles spiked higher while fuel demand slumped last week, each by their most ever, government data showed on Wednesday, as the U.S. oil industry felt the full brunt of efforts to stem the spread of the coronavirus pandemic.
Crude stocks soared by 15.2 million barrels in the week to April 3, their biggest-one week rise. Most of those inventories were sent to the key Cushing, Oklahoma, futures storage hub, where stocks rose by 6.4 million barrels last week, the U.S. Energy Information Administration (EIA) said, also the most in one week ever.
U.S. gasoline stocks rose by 10.5 million barrels in the week, also exceeding expectations and falling just shy of an all-time record. Gasoline product supplied in the most recent week slumped by 24% to 5.1 million bpd.
Crude and Fuel prices have sunk this year as the coronavirus pandemic has sapped global fuel demand, virtually shutting down commercial aviation worldwide and cutting off gasoline demand as people stay home and businesses remain shuttered.
On Wednesday, the EIA said U.S. fuel demand dropped by about one-third in the last three weeks, with last week’s fall of 3.4 million barrels per day the most ever.
Daily Production Drops
Crude output has already to drop as well, with daily production plunging 600,000 barrels per day to 12.4 million bpd, in its biggest decline since July 2019, the EIA said.
Refineries severely cut activity the week-ending April 3, with crude runs falling 1.3 million bpd. Refinery utilization rates tumbled 6.7 percentage points to drop to just 75.6% capacity use.