Oil has risen to levels not seen since the Covid-19 lockdowns crippled the biggest markets in the world, boosted by signs of demand growth and reports of a potential coronavirus vaccine.
New York's Futures soared Monday to 8.1 per cent, the highest point since mid-March. Chinese oil consumption stood at 13 million barrels per day, just short of a year earlier rate, said traders and executives.
Moderna Inc. announced positive early results from an experimental drug, easing concerns of a return of the disease and providing hope that economies can reopen safely.
Major output reductions by the producers are beginning to take hold. In more than a decade, American shale drilling companies have cut drilling rigs to a minimum, and Russia has vowed full adherence with the OPEC+ reductions rule. According to refiners, Saudi Arabia didn't give extra oil volumes to three Asian customers who asked for it.
In contrast, with open interest in June futures at a fraction of later months and U.S. storage facilities no longer complete to the brim, it looked impossible to replicate the fall that took the West Texas Intermediate contract to nearly $40 a barrel below zero.
In another indication, traders are not worried about a sudden plunge, since early March, just before the price war kicked off, the premium to pay for out-of-the-money puts on WTI versus calls dropped to the lowest.
Oil has accelerated gains in Asia to its highest levels since mid-March in the midst of signs that demand is beginning to rebound and after positive preliminary studies for an experimental coronavirus vaccine triggered speculative concerns economies may quickly snap back.
U.S. demand is seen to catch up as more shutdown restrictions are lifted. Disease hotspot New York will open a sixth area on Tuesday and urged major sports teams to resume playing without fans, while New Jersey will permit some recreational outdoor areas and businesses to reopen later in the week.
Nevertheless, demand is still in its early recovery phase, and its comeback is unstable. Oil is down about 48 per cent this year, and while progress is being made towards an antidote, there are still worries about a second outbreak of the virus on the market.
Meanwhile, according to the executives and traders who monitor the country's consumption, Chinese oil demand has recovered to about 13 million barrels a day. That's just short of the May 2019 13.4 million barrels a day, and December 13.7 million bpd.
