Oil on track for record monthly gain on optimistic outlook for demand recovery
Oil is on track for its biggest-ever monthly gain after the easing of coronavirus lockdowns lifted optimism for a demand recovery and the world’s top producers slashed their output.
Futures in New York slipped slightly on Friday, after rising 2.7 percent the previous day. While US government data showed that American crude stockpiles rose by nearly 8 million barrels last week, the demand outlook is improving. The four-week average of gasoline supplied to the market has steadily risen as parts of the country emerge from coronavirus lockdowns. The Energy Information Administration again posted a large negative adjustment factor, indicating that production is probably lower than official data show.
The US crude benchmark has jumped almost 80 percent in May, the biggest gain in exchange data compiled by Bloomberg going back to 1983. That comes after four months of losses and prices are still down 45 percent this year.
Economic improvement and declining crude supplies have powered oil’s recovery from its Covid-induced price collapse. But the market remains fragile, with the risk that higher prices spur producers to restart wells and undercut gains.
Meanwhile, optimism that American fuel demand will recover as quickly as China’s is hasty, according to BB Energy, the oil trading house that won big when prices fell below zero last month.
Restaurants are still closed and spending cuts on health care and vacations will bog down the service-based economy in the US.
OPEC+ is set to meet June 9-10 to decide whether to extend output cuts beyond July. Russian President Vladimir Putin and Saudi Arabian Crown Prince Mohammed bin Salman this week reiterated their cooperation. The Kremlin described the call as positive on Thursday.
Abu Dhabi National Oil Co. said it will reduce crude production in line with the OPEC+ agreement and government directives, according to a company notice to buyers, agreeing to cut shipments of all crude grades by 5 percent for July.