Oil has risen to the highest in more than five weeks as signs emerge that at a time when demand is rising, OPEC and its allies are scaling back crude shipments.
New York's Futures rose 9 per cent Thursday. According to Petro-Logistics, OPEC+ had reduced exports by 5.96 million barrels a day during the first 14 days of May. Saudi Aramco, meanwhile, cut oil sales to the U.S. and Europe by around 50 percent.
The International Energy Agency said the outlook for global markets is improving with demand a bit better than expected, while oil major BP Plc said consumption has risen this week as cars return to the roads.
Crude prices have ticked in the last two weeks as some countries have eased restrictions on coronavirus to allow reopening of factories and shops. Brent's oil futures settled $1.94, or 6.7 percent, to a barrel of $31.13. U.S. Crude futures from West Texas Intermediate settled $2.27, or 9 percent, to $27.56 per barrel.
The market climbed back from Wednesday's declines hinged on a dreary outlook for the economy from U.S. Federal Reserve chief Jerome Powell, who warned of an "prolonged period" of sluggish economic rally to cushion an unexpected collapse in U.S. inventory.
In recent days, global oil prices have been boosted by Saudi Arabia's pledge to cut its oil production by an additional one million barrels a day, beginning in June, in addition to the cuts outlined in the agreement between the Petroleum Exporting Countries Organization and its allies kicked in on May 1, said Cailin Birch, global economist at The Economist Intelligence Unit.
Saudi Arabia and its OPEC+ partners' "unprecedented pledges" should "help shore up investor optimism for a slight improvement in the June and July market balance," Birch added, in an emailed commentary.
Investors are also focused on the demand trajectory in the midst of worries that a resurgence of cases of coronavirus may derail an economic recovery. Although the IEA has joined Saudi Arabia and Russia in seeing signs of improving demand, the market has yet to recover from an unprecedented plunge that sent crude West Texas Intermediate futures into negative territory last month.
There is much more hope that the "worst days for the sector might be behind us," said Judith Dwarkin, RS Energy Group's chief economist. According to a person with knowledge of the situation, Aramco will reduce shipments to some U.S. and European buyers by as much as 70 percent.
