While futures in New York edged lower in early Asian trading, prices are still up about 11 percent this week after closing above $27 a barrel on Thursday for the first time in over a month. Saudi Arabia has slashed supply to the US, Europe and Asia as OPEC and its allies reduce daily output by almost 10 million barrels. The International Energy Agency said that the outlook is improving, while Goldman Sachs Group Inc. and BP Plc see gasoline use rising.
Oil is still down more than 50 percent this year after a rout that pushed prices below zero and the road back to pre-virus levels of demand looks long and uncertain. OPEC this week presented a bleak assessment of crude markets for the second quarter and the US Federal Reserve warned of a lasting downturn, but efforts to rebalance the market appear to be working.
OPEC+ has cut daily exports by almost 6 million barrels during the first 14 days of this month, according to Petro-Logistics, while Goldman increased its global demand estimate for May as gasoline consumption climbs faster than expected in China, the US and Germany.
“Market sentiment has turned cautiously constructive since the end of April and I expect it to remain as such unless there are major setbacks in terms of infection rates,” said Vandana Hari, founder of Vanda Insights in Singapore. Demand expectations will remain “fragile with a nervous eye on how economies fare in reopening,” she said.
Global oil production is on track for a historic decline this month to the lowest level in nine years, according to a monthly report from the IEA on Thursday. The agency boosted its 2020 demand estimate by 700,000 barrels a day, but it still remains set for an annual plunge of 8.6 million a day, or about 9 percent.
The market recovery remains fragile. Over 30 tankers laden with Saudi Arabian oil are set to reach the US in May and June, according to ship-tracking data compiled by Bloomberg, putting fresh pressure on storage just as a glut in America shows signs of easing.