Oil rose for a fifth day as investors weighed signs that the market is rebalancing against what’s still a precarious economic outlook.
Futures in New York for July delivery climbed above $32 a barrel as lockdowns continued to ease around the world, and data in the U.S. and Europe pointed to declining oil stockpiles. Nevertheless, a report that a virus vaccine study didn’t produce enough data to assess its success added caution to markets.
Oil is in much better shape than it was a month ago as output cuts have kicked in and pockets of demand have emerged. There was no repeat of April’s plunge below zero when the West Texas Intermediate contract rolled over, with June futures trading at a premium to July before expiry, suggesting less concern that the U.S. could run out of storage space.
“Demand is now clearly on its way back from extremely low levels in April,” said Bjarne Schieldrop, chief commodities analyst at SEB AB. “The direction for oil is most likely still higher from here.”
- WTI for July delivery rose 2.5 per cent to $32.75 a barrel as of 8:50 a.m. in New York
- Brent for July settlement advanced 2.7 per cent to $35.59 a barrel
In more evidence that the supply response to the virus is gathering pace, the American Petroleum Institute reported that stockpiles at the storage hub in Cushing, Okla., fell by 5.04 million barrels last week, people familiar with the data said. Nationwide crude inventories shrank by 4.84 million barrels, the data showed. Official government figures are due later on Wednesday.
WTI prices have climbed more than 70 per cent this month amid the rebound in demand and reductions in supply. Still, any continued rally could be self-defeating as it would encourage output to return when demand is still shaky, UBS Group AG said in a note.
© 2020 Bloomberg L.P.