Oil rallies on hopes of more OPEC cuts amid flaring Gulf tensions

Price of oil spiked despite growing evidence that no amount of output cuts will offset demand destroyed by coronavirus.

Price of oil spiked despite growing evidence that no amount of output cuts will offset demand destroyed by coronavirus.

Since the start of the year, both benchmarks have lost more than two-thirds of their value. Fuel demand is down about 30 percent worldwide in April, and supply will outstrip demand for months to come due to the pandemic.Brent rose $1.08, or 5.30 percent, to $21.45 a barrel by 3:21pm Eastern Daylight Time (19:00 GMT), while WTI jumped $3.07, or 22.28 percent, to $16.85.

The Organization of the Petroleum Exporting Countries and other oil-producing nations, a grouping known as OPEC+, agreed this month to cut output by a record 9.7 million barrels per day, around 10 percent of global supply, to support oil prices, but prices continued to decline.

Kuwait said on Thursday it had begun cutting oil supply to the international market, ahead of the May 1 date when the deal was supposed to take effect.Whether that will be sufficient to offset weak demand is unclear. Rystad Energy cut its forecast for oil demand in 2020 to 89.2 million bpd, a 10 percent decline from 2019. Last week, the energy consultant projected demand would fall to 90.3 million bpd in 2020.Russia is looking for options to cut its production and may go as far as burning its own oil, sources said. Its production has not changed much from March until now.

The market was also higher after US President Donald Trump said he had instructed the US Navy to fire on any Iranian ships that harass it in the Gulf, although he added later he was not changing the military’s rules of engagement.