Oil rose above $31 a barrel on Wednesday as hopes for a recovery in demand as some countries ease coronavirus lockdowns offset a report showing a higher-than-expected rise in U.S. inventories.
Brent crude has almost doubled since hitting a 21-year low reached on April 22, supported by expectations demand will recover and by a record supply cut led by the Organisation of the Petroleum Exporting Countries.
Brent LCOc1 was up 79 cents, or 2.6 per cent, at $31.76 a barrel at 0930 GMT, having risen in the past six sessions.
West Texas Intermediate (WTI) crude CLc1 added 88 cents, or 3.6 per cent, to $25.44.
“Clearly, the optimism of the re-opening of the global economy has supported the oil rally,’’ said Naeem Aslam, an analyst at Avatrade.
But in a reminder that a supply glut persists, the American Petroleum Institute said on Tuesday that U.S. crude inventories rose by 8.4 million barrels last week, more than analysts expected.
“We’re talking about normalisation of supply and demand but we’ve got a long way to go,’’ said Lachlan Shaw, National Australia Bank’s Head of Commodity Strategy.
Italy, Spain, Nigeria and India as well as some U.S. states, began allowing some people to go back to work and opened up construction sites, parks and libraries.
Germany’s federal government and 16 states have agreed on ways to ease the lockdown.
The easing of lockdowns should lead to a recovery in global oil demand, which in April was expected to collapse by at least 20 per cent, an unprecedented drop, as governments told people to stay at home.
To tackle the resulting glut, OPEC and its allies agreed to a record oil output cut of 9.7 million barrels per day, about 10 per cent of pre-coronavirus demand.
That reduction began on May 1.
For now, though, soaring inventories are a reminder of excess supply lingering in the market.
Traders will be looking for confirmation of the API’s inventory report when the official U.S. government figures from the Energy Information Administration come out later on Wednesday.
“We would tend to agree that the market has bottomed out, but would caution against getting overly excited about this,’’ said analysts at JBC Energy.
“The data trundling in for April really is shockingly bad.’’
The capitalisation of the Nigerian Stock Exchange (NSE), rose by N375 billion in six hours of trading, amid price appreciation recorded by some blue chips.
Specifically, the market capitalisation which opened at N12.033 trillion, rose by N375 billion or 3.12 per cent to close at N12.408 trillion.
Similarly, the All-Share Index increased by 719.45 points or 3.12 per cent to close at 23,809.31 in contrast with 23,089.86 on Monday.
Accordingly, the Month-to-Date gain increased to 3.4 per cent as Year-to-Date losses moderated to -11.3 per cent.
Mr Ambrose Omordion, the Chief Operaing Officer, InvestData Limited, attributed the development to spike in crude oil prices as lockdowns were being relaxed in different countries.
Omordion said the relaxation triggered demand for oil, as movement and manufacturing activities resumed.
He added that the month of May, being dividend qualification dates for many blue chip stocks that had suffered losses recently, was attracting funds and buying interest on high yields.
“These stocks are Dangote cement, Nestle, Okomu, Julius Berger and others.
“Investors should not be carried way with this trend but should have a good exit strategy and play with caution,” Omordion said.
Nestle led the gainers’ table during the day, gaining N54.80 to close at N975 per share.
Dangote Cement trailed with N13 to close at N143, while MTN Nigeria Communications, added N4 to close at N120per share.
Zenith Bank appreciated by 50k to close at N14.85, while Lafarge Africa increased by 40k to close at N10.70 per share.
On the other hand, Flour Mills recorded the highest price loss to lead the laggards’ table, dropping by N1.25 to close at N19.75 per share.
BUA Cement came second with a loss of 80k to close at N31.80, while May and Baker declined by 27k to close at N2.43 per share.
NPF MicroFinance Bank was down by 12k to close at N1.13, while Linkage Insurance dropped by 5k to close at 48k per share.
Guaranty Trust Bank was the most active stock during the day, exchanging 54.29 million shares valued N1.14 billion.
Mutual Benefit followed with an account of 41.79 million shares worth N9.02 million, while Zenith Bank traded 40.31 million shares cost N591.01 million.
Sterling Bank sold 30.79 million shares valued N37.64 million, while Access Bank traded 28.78 million shares valued N177.92 million.
In all, the volume of shares traded rose by 38.15 per cent as investors bought and sold 345.18 million shares valued N4.252 billion in 4,689 deals.
This was in contrast with 249.86 million shares worth N2.39 billion achieved in 6,538 deals on Monday.