U.S. oil prices rose to a nine-week high Monday, pulling Brent crude closer to $35 a barrel, as major economies ease lockdown restrictions and OPEC supply cuts bolster renewed demand optimism.
With Europe basking in an early spring heatwave, which enticed consumers outside over the weekend, and economies from Germany to the United Kingdom cautiously returning to work, hopes of a near-term recovery have boosted risk markets around the world. At home, states, businesses, and factories are consistently returning to at least limited operations as coronavirus infection rates slow to the lowest levels since the pandemic began in late February.
With Saudi Arabia, the world's second-largest producer behind the United States, planing to trim another 1 million barrels per day from its June output total, taking the tally to a two-decade low of just under 7.5 million barrels per day, and China posting an 11% month-on-month gain in daily crude processes in April, oil markets have seen a steady and consistent gain since trading in negative territory last month.
Oil imports into China, the world's largest energy market, also increased to around 9.84 million barrels per day, and have averaged 10.11 million barrels per day for the first four months of the year, a 1.7% gain from the same period in 2019.
"The worst in demand destruction is now behind us, although it will take some time for the market to return to pre-COVID-19 demand levels," said Warren Patterson, head of the commodity strategy at ING, who forecasts a second half price of $45 for Brent crude over the second half of the year.
"The supply response is also helping. and it's not just OPEC, with producers outside the alliance also shuttering significant amounts of production."
Front-month WTI futures contracts for June delivery, the benchmark for U.S. prices which expires tomorrow, were last seen $3.18 higher from their Friday close in New York and changing hands at $32.56 per barrel, the highest since March 12. July contracts were marked $2.71 higher at $32.23 per barrel.
Brent futures for July delivery, which benchmark around 60% of global crude purchases, gained $2.31 to trade at a five-week high of $34.81 per barrel.
Oil prices collapsed last month, with U.S. crude briefly trading in negative territory for the first time in history, as investors worried over the lack of domestic storage for surplus crude amid the ongoing slump in world demand.
Prices were also pressured by a move from the United States Oil Fund (USO) - Get Report, the world's biggest oil ETF, to sell its entire portfolio of WTI futures contracts for June delivery over just four days.
Last Friday, oil services group Baker Hughes said U.S. drillers pulled 35 rigs from operation in the week ending May 15, taking the overall total to an all-time low of 339, capping a one-month period during which some 35% of capacity has been taken offline amid signals of a cliff-edge decline in global demand.