U.S. oil prices continued rising early on Tuesday morning, the day on which the June contract expires, before falling slightly in what was a much smoother and uneventful trade compared to last month's dramatic plunge into negative prices.
The relatively smooth day to the expiry signals that the fundamentals with supply, demand, and storage availability have improved since last month.
As of 11:42 a.m. CDT on Tuesday, prices fell back a bit with WTI Crude trading at $31.69, down by 0.41 percent on the day, while Brent Crude prices were down 0.95 percent at $34.45.
Tuesday's trading session is shaping up to be a non-event, even if today is the expiry date of the front-month June contract of WTI Crude futures and a few weeks ago analysts were warning of another dip into negative prices after the U.S. benchmark prices plummeted by 300% to settle at -$37.63 per barrel a day before the May futures contract expired last month.
Oil prices have been rising for two weeks, and jumped by 11 percent to a two-month high of over $32 on Monday, amid signs of demand recovery and accelerated production cuts from all oil producers.
Last week, the Energy Information Administration reported a crude oil inventory decline of 700,000 barrels for the week to May 8-the first drop in commercial inventories in 16 weeks. Related: Should U.S. Shale Be Worried About A Chinese Takeover?
Oil demand in the world's top oil importer, China, is said to have rebounded to nearly pre-coronavirus levels. Gasoline demand in the United States stood at 7.398 million bpd for the week to May 8, and although this was still below the 9.148-million bpd demand for the same week last year, the number was a clear improvement from the 5.86-million-bpd demand just two weeks prior, EIA data shows.
Referring to the WTI Crude contract rollover today, Steen Jakobsen, Chief Investment Officer at Saxo Bank, said on Monday:
"The expiry tomorrow of the June WTI contract is expected to be a non-event after stockpiles at the key storage hub in Cushing, Oklahoma, shrank last week."
Yet, there is a short-term risk to the oil price rally, and this is producers rolling back the cuts, especially in the U.S. with the price back above $30 a barrel, Jakobsen said.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More