Oil prices surged early on Tuesday, heading for a fifth consecutive day of gains, amid signs that demand is crawling back up with eased lockdowns in some U.S. states and major European economies, which would help ease the global oil glut.
As of 10:45 a.m. EDT on Tuesday, WTI Crude was rallying 12.47 percent to $25.72 per barrel, and Brent Crude was surging by 10.59 percent to above $30 a barrel—$30.18, as many countries in Europe, as well as several U.S. states, moved to cautiously ease lockdowns at the beginning of this week.
Early on Tuesday, oil prices were at their highest levels in nearly a month, and doubled from the opening on April 29, the day on which the current five-day streak of gains began.
Investors and traders are betting that the worst of the oil demand loss is already behind us and demand will start to pick up from the very low levels seen in April. As demand is expected to gradually increase, global oil supply is expected to come off in the coming months. The OPEC+ group has pledged production restrictions of 9.7 million bpd in May and June, before easing the cuts to 7.7 million bpd for the period July to December 2020. On top of the voluntary OPEC+ cuts, producers in North America are reacting to market conditions and are curtailing production in the U.S. shale patch and in Canada’s oil sands. Related: Iraqi Kurdistan On The Brink Of Collapse As Oil Prices Crash
Analysts and traders expect the combination of increasing demand and decreasing supply to alleviate the oil glut and to prop up oil prices.
“A combination of demand edging higher as we move through the remainder of the year, while supply is expected to slip, will likely push the global oil market into deficit over the second half of this year, allowing it to draw down the significant stock builds from the first half of this year,” ING strategists Warren Patterson and Wenyu Yao said on Monday.
Early on Tuesday, U.S. President Donald Trump expressed satisfaction with the rising oil prices, tweeting “Oil prices moving up nicely as demand begins again!” A tweet from the U.S. President praising higher oil prices would have been unthinkable just four months ago.
By Tsvetana Paraskova for Oilprice.com
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