NEW YORK—Crude oil prices have skyrocketed this week as volatility continued to affect the broader financial markets, as well as the energy sector, the Wall Street Journal reports. Traders are gearing up for more of the same in the near future.
West Texas Intermediate futures delivering oil in June jumped 20% to settle at $16.50 a barrel, while Brent crude futures increased 4.7% to settle at $21.33 a barrel. Oil demand in China has begun to rise, while tensions between Iran and America also helped push prices higher.
“When you look at China, road traffic and refinery operations are back up,” said Norbert Rücker, head of economics at Julius Baer. “Don’t forget the geopolitical side too.” He pointed to the potential for the Strait of Hormuz, one of the preferred routes for tankers, to be closed because of Iranian-U.S. tensions.
Analysts and traders predict oil price volatility will continue because the coronavirus pandemic has halted consumption of tens of millions of barrels of oil. OPEC (Organization of the Petroleum Exporting Countries) has slashed oil production, but it won’t have an immediate impact on the dropping demand. “We’re close to capitulation,” Marwan Younes, chief investment officer at Massar Capital Management, told the Journal. “We’re getting close to the point when people just stop trying to buy [U.S. crude oil futures].”
U.S. stockpiles of crude oil accumulated by 15 million barrels to reach 518.6 million barrels last week, according to the U.S. Energy Information Administration. Production declined by 100,000 barrels a day, but the stockpiles are still around 9% higher than the five-year average.