Oil prices jumped more than 20% on Wednesday after data showed a smaller-than-expected build in U.S. inventories, as well as on the hope that economies will reopen sooner than expected.
West Texas Intermediate for June delivery surged 22.04%, or $2.72, to settle at $15.06 per barrel, after earlier trading as high as $16.78. International benchmark Brent crude gained $2.08, or 10.17%, to settle at $22.54 per barrel.
Optimism that economies will be able to re-open ahead of schedule rose after Gilead said early results of its coronavirus drug trial showed that at least 50% of patients treated with a five-day dosage of antiviral drug remdesivir improved and more than half were discharged from the hospital within two weeks.
Stocks rose following the news, despite a 4.8% contraction for U.S. GDP in the first quarter — the largest contraction since the financial crisis.
Oil prices also got a boost on a smaller-than-expected build in U.S. inventories. According to data from the U.S. Energy Information Administration, crude stockpiles rose by 9 million barrels for the week ending April 24. This was lower than the 11.7 million barrel build analysts polled by FactSet had been expecting.
The data also showed that U.S. production fell by 100,000 barrels per day last week to 12.1 million bpd. This is 1 million bpd below the record 13.1 million bpd production set during the week ending March 13.
"Oil prices rose on Wednesday morning as traders cling to potentially positive indications that the demand-supply gap may somewhat become smaller soon," Rystad Energy's global head of oil markets Bjornar Tonhaugen told CNBC.
"Overall we need official announcements for cuts or economies reopening for prices to stabilize. Expect a lot of volatility and price swings either way in coming days as bullish and bearish traders weigh their hopes and fears in a market that is desperate to find something to hang on," he added.
Oil prices swayed wildly on Tuesday between gains and losses as investors continue to keep an eye on depleting crude storage space amid a dearth in demand. The coronavirus pandemic, which has forced countries around the world to shut their economies temporarily as people are told to stay home, has reduced global demand for crude by as much as a third, according to some estimates.
WTI for June delivery fell 44 cents, or 3.4%, to settle at $12.34 per barrel on Tuesday. International benchmark Brent crude, on the other hand, gained 47 cents, or 2.35%, to settle at $20.46.
In a note dated April 28, Moody's Investors Service said it was reducing its near-term oil price assumptions for WTI as well as Brent.
"Exceptionally weak short-term prices will persist until production drops enough to ease the strain on storage facilities already operating at or close to full capacity," said Elena Nadtotchi, vice president and senior credit officer at Moody's. "Significant supply adjustments in due course should help to balance the market later in 2020, but the pace of the market's rebalancing and rising oil prices will depend on demand recovery."
Moody's price prediction for WTI is currently $30 per barrel this year, and $40 next year. For Brent, it sees prices averaging $35 per barrel in 2020 and $45 in 2021.
Data from the American Petroleum Institute released Tuesday night showed that U.S. crude inventories jumped by 10 million barrels in the week to April 24, bringing the total to 510 million barrels. That was lower than analysts' expectations of a build of 10.6 million barrels, according to estimates from Reuters.
— CNBC's Patti Domm Sam Meredith contributed to this report.