Oil rallies on hopes for unprecedented stockpile purchases

TOKYO (Reuters) – Benchmark U.S. crude rose more than 3% in early trade on Wednesday, recovering from a 10% slump the previous session on hopes for purchases by consumer countries for their strategic stockpiles on a scale not before seen.

U.S. West Texas Intermediate (WTI) crude futures were up 3.43%, or 69 cents, at $20.80 at 2225 GMT, after having crashed 10.3% on Tuesday on fears that a record global output cut by producers would not offset plunging fuel demand hit by the coronavirus pandemic.

The Organization of the Petroleum Exporting Countries, along with Russia and other producing countries – a grouping known as OPEC+ – partnered with other oil-pumping powerhouses including the United States for an agreement set to remove a total of around 19.5 million barrels per day (bpd) from the market.

Officials and sources from OPEC+ states indicated the International Energy Agency (IEA), the energy watchdog for the world’s most industrialised nations, may announce purchases of up to several million barrels to buoy the deal.

The United States – the world’s biggest oil producer but an even bigger consumer – along with Japan and South Korea have said they could buy oil to replenish reserves.

The U.S. Energy Department said on Tuesday it is negotiating with nine energy companies to store about 23 million barrels of domestically produced oil in its SPR, though such purchases would seem far short of what some producer countries appear to hope for.

(Reporting by Yuka Obayashi; Editing by Lincoln Feast.)