Oil prices advanced by over $1 per barrel Monday morning on the back of production cuts and hints of measured recovery in demand as the coronavirus lockdowns eased further around the world.
Brent crude, Nigeria oil grades’ benchmark, had gained $1.33 or 4.1% to climb to $33.83 a barrel as of 07:34 West African Time after hitting its peak since 13th April.
WTI went higher by $1.65 or 5.6% to $31.08, having hit its highest point also since 16th March.
Stephen Innes, top strategist at AxiCorp, said “Oil prices may show further upside momentum as the easing in mobility restrictions grows.”
The WTI contract for June expires on Tuesday even though there was little sign of WTI replaying the record fall below zero experienced in April a day before May contract expired amidst indications that oil demand and derived fuels is recovering after the recent oil price shock.
Output is plunging with U.S. energy companies scaling down the number of oil and natural gas rigs, resulting in an all-time low for two weeks in a row.
In some way, it helped calmed nerves regarding the WTI contract delivery point in Cushing, Oklahoma, filling up.
“Given particularly that surprise draw that we saw on inventories last week in the U.S., it seems unlikely that those concerns about storage facilities will reassert themselves,” said Michael McCarthy, chief market strategist, CMC Markets, Sydney.
Chairman, U.S. Federal Reserve, Jerome Powell issued an upbeat outlook for economic rejuvenation later this year.
“Assuming there is not a second wave of the coronavirus, I think you will see the economy recover steadily through the second half of this year.”
Meanwhile, Eurasia Group believes substantial supply reduction will run into 2021 as fuel demand rises.
“Demand for road fuel is gradually rising as governments ease lockdowns, but recovery will be slow and there is a risk of repeat COVID-19 outbreaks and quarantine orders,” its analysts said.