Oil prices settled higher overnight after the International Energy Agency (IEA) forecast lower global stockpiles in the second half of 2020, although worries remain that a second surge in coronavirus infections could occur in coming months.
Crude prices have ticked up in the last two weeks as some countries relaxed coronavirus restrictions to allow factories and shops to reopen.
Brent crude futures settled up $US1.94, or 6.7 percent, to $US31.13 a barrel.
US West Texas Intermediate (WTI) crude futures settled up $US2.27, or 9 per cent, to $US27.56 a barrel.
The market rebounded from Wednesday’s losses built on a glum forecast for the economy from US Federal Reserve Chairman Jerome Powell, who warned of an “extended period” of weak economic growth. That offset an unexpected drop in US stockpiles.
Initial claims for state unemployment benefits totaled a seasonally adjusted 2.98 million for the week ended May 9, the US Labor Department said on Thursday. While that was down from 3.18 million in the prior week and marked the sixth straight weekly drop, claims remain astoundingly high.
“Gasoline demand correlates pretty well with the employment level, and it’s hard to see gasoline demand come back much more than it already has,” said John Kilduff, partner at Again Capital LLC in New York.
US crude inventories fell for the first time in 15 weeks, the Energy Information Administration said on Wednesday, with a fall in US crude stockpiles of 745,000 barrels to 531.5 million barrels in the week to May 8.
On Thursday, the IEA again forecast a record drop in demand in 2020, although it trimmed its estimate for the fall, citing measures to ease lockdowns.
As demand increases, the IEA expects crude stockpiles to shrink by about 5.5 million barrels per day in the second half.
“While these supply and demand dynamics are certainly capable of boosting prices near term, a potential record level of global crude supply will remain as a force to be reckoned with,” Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois, said in a report.
The Organisation of the Petroleum Exporting Countries said on Wednesday it expected 2020 global oil demand to shrink by 9.07 million bpd, a deeper contraction than its previous forecast of 6.85 million bpd.
It said it expected the second quarter to see the steepest decline. In response, Saudi Arabia deepened its planned cuts for June, reducing output by nearly 5 million barrels per day.
“The Saudis going from market wreckers to market makers again and leading by example has sent a very supportive message,” Kilduff said.
The US Commodities Futures Trading Commission warned exchanges and brokerages on Thursday that they should be prepared for volatility and possible negative pricing for certain contracts as expiration approaches next week.