Global benchmark Brent rose more than 1 per cent overnight to its highest price since March, supported by lower US crude inventories, OPEC-led supply cuts and recovering demand as governments ease coronavirus restrictions on people’s movements.
Oil has slumped in 2020, with Brent hitting a 21-year low below $US16 a barrel in April as demand collapsed. With fuel use rising and more signs that the supply glut is being tackled, Brent has since more than doubled.
Brent rose 34 US cents, or 1 per cent, to settle at $US36.09 per barrel. US West Texas Intermediate crude closed up 43 US cents, or 1.28 per cent, to $US33.92.
In the latest sign the supply glut is easing, US crude inventories fell 5 million barrels last week. Analysts had expected an increase.
“The rally in the crude futures is beginning to approach levels in which U.S. shale production declines will begin to slow and possibly reverse as low cost producers attempt to generate revenue,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.
At the same time, there is evidence of recovering fuel use.
Top US airlines and Air Canada on Tuesday reported slower ticket cancellations and an improvement in bookings on some routes, though executives said overall demand remained weak.
However, data from the US Labor Department on Thursday revealed another 2.4 million Americans filed for unemployment last week, which will affect gasoline demand, according to John Kilduff, partner at Again Capital in New York.
“We’re seeing gains consolidate somewhat after another week of bad economic data in the United States,” said Kilduff.
The Organisation of the Petroleum Exporting Countries, Russia and other allies, known as OPEC+, agreed to cut supply by a record 9.7 million barrels per day from May 1.
So far in May, OPEC+ has cut oil exports by about 6 million bpd, according to companies that track the flows, suggesting a strong start in complying with the deal. OPEC says the market has responded well.