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Oil futures on Friday headed higher, after trading on either side of unchanged early, as commodity investors attempted to take stock of a historic collapse in prices that cast a global spotlight on problems of oversupply and dwindling storage in the energy complex.
After a closely followed oil contract on Monday fell into negative territory for the first time ever, meaning that sellers had to pay buyers to take crude off their hands, market participants have been struggling to react to the unprecedented turmoil.
Some producers in the U.S. are temporarily shutting down oil wells, or have plans to, while other participants have said they would aim to cut output ahead of a May 1 deadline to enact global reductions under a historic pact forged by the Organization of the Petroleum Exporting Countries and allies including Russia, a group collectively known as OPEC+.
Kuwait on Thursday, for example, said it would consider start trimming its production early, according to Reuters, citing the country’s new agency KUNA.
Meanwhile, Continental Resources Inc. US:CLR, a shale-oil producer founded by oil tycoon Harold Hamm, said it stopped all drilling and shut in most of its wells in Bakken Shale fields in North Dakota, Reuters reported, citing people familiar with the company’s plans.
It is unclear what effect those actions will have in balancing the massive oversupply of crude and the lack of storage facilities to store the commodity which has pressured the energy industry.
“As we see it, a wave of shut-ins is inevitable for the oil market to come closer to a balance,” wrote Bjornar Tonhaugen, head of oil markets at Rystad Energy in a daily research note.
“Not having enough storage is not only a theoretical problem but a practical one too. Unless more production shuts down, the extracted oil will literally have nowhere else to be stored. Which implies a forced shutdown across several locations,” the analysts wrote.
June West Texas Intermediate crude US:CLM20, the U.S. benchmark grade, gained 40 cents, or 2.6%, at $16.92 a barrel, but the contract traded a range between a high of $17.95 and $15.64 in the overnight session. On Thursday, WTI surged nearly 20%, adding to similar gains the session prior.
Gains on Friday would mark a third straight advance for the international and U.S. grade oils and would represent the longest such streak since a similar stretch ended March 25.
Despite those outsize gains, WTI is still set for a 32% decline for the week, based on the most-active contract.
June Brent crude UK:BRNM20, the international benchmark, rose 68 cents, or 2.7%, at $25.46 a barrel, after gaining 4.7% on Thursday.
For the week, Brent is set to decline more than 9% for the week.
Moves on the day come after the World Bank cut its outlook for crude prices to an average at $35 barrels a year for 2020, down from its 2019 average, pointing to overproduction.
“The downward revision reflects an historically large drop in demand,” the World Bank said in a news release.
Since the drop to negative prices for oil, the commodity has tried to recover since Wednesday after President Donald Trump in a tweet “instructed the United States Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea.”
Those signs of Middle East tensions have offered some support to crude.
