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Oil prices surged for a third straight day Thursday amid evidence that fuel demand is starting to return, compounding the benefit from production cuts by the world’s largest producers starting on May 1.
West Texas Intermediate crude oil, the U.S. benchmark, gained 25 percent Friday to $18.84 per barrel, cutting its loss in April to 8.01 percent.
Brent crude oil rallied 12 percent to $25.27 per barrel. The international benchmark gained 11 percent for the month.
The energy components have lost 69 percent and 62 percent, respectively, this year.
Oil is rallying because “demand destruction has bottomed out and production will drop,” Phil Flynn, senior market analyst at the Price Futures Group, told FOX Business.
He added the market also received good news in the form of a “drop in US oil production on the eve of the biggest coordinated global oil production cut ever.”
The output reductions, if all sides live up to the agreement, will end the price war between Russia and Saudi Arabia and eliminate 20 million crude barrels a day from a market that has been overwhelmed with supply as “stay-at-home” orders issued by governments around the world slashed global demand by 30 million barrels daily.
U.S. crude supplies grew by 8.99 million barrels during the week ended April 24, according to the U.S. Energy Information Administration. Total U.S. inventory stood at 527.6 million barrels, up 1.74 percent from the week prior and 12 percent from a year ago.
At the same time, EIA data showed the amount of crude oil input to refineries fell 3.98 percent to 12.88 million barrels a day.
Also helping investor sentiment was the “positive data” from the study of the drug remdesivir, which has shown promising signs as a COVID-19 treatment -- a development that might bring back some of the lost demand for fuel.
“Oil has seen a big momentum change as the possibility of a treatment for COVID-19 means that the global economy can soon reopen and get back to normal,” Flynn said.