As Italy, Spain, Nigeria and India, together with Ohio and other states in the United States, began allowing some people to go back to work and also opened up construction sites, parks and libraries, oil price jumped again yesterday on hopes of a recovery in fuel demand.
Reuters reported that some European and Asian countries along with several US states began to ease lockdown measures put in place to curb the spread of COVID-19 pandemic.
Following this development, which has raised the hope for oil demand, West Texas Intermediate (WTI) crude futures were up 11.2 per cent, or $2.29, at $22.68 per barrel, while the global benchmark, Brent crude futures were up 7.2 per cent, or $1.97, at $29.17.
It had earlier gained $2.96 to trade at $30.16 per barrel.
Vehicle traffic in most of the United States, including those yet to lift shelter-in-place orders has also rebounded
Swiss bank UBS said the easing of restrictions would help lead to a balance in supply and demand for the oil market in the third quarter and even projected an undersupply by the fourth, forecasting an end-2020 recovery of Brent to $43 per barrel and $55 per barrel by mid-2021.
Reflecting hopes that the oil industry may have passed the worst of coronavirus-induced lockdowns, hedge funds and money managers were buyers of petroleum derivatives for a fifth straight week in the week ended April 28.
Morgan Stanley said the peak of oversupply in global markets had likely been reached and a storage crunch was abating.
Still, global oil demand and prices suffered historic losses in April and recovery is likely to be slow with air traffic not expected to rebound any time soon.
With Saudi Arabia, Russia other major producers and companies slashing output, the market shrugged off a decision by a Texas energy regulator to abandon a proposal for a 20 per cent output cut in the United States’ biggest oil-producing state.
With the trend in the global oil market, crude oil price is set to end the nightmare of producers following the decreasing United States’ inventories, coupled with expectations that the gradual relaxation of lockdowns by countries would improve demand.
Apart from easing of the lockdowns by countries, the price is also being lifted by signs that the United States crude glut is not growing as quickly as expected after the COVID-19 pandemic had caused it to slump to a two-decade low.
The increases are, however, a modest but marked recovery from the nosedive of US crude futures for May to as much as $40 into the negative on April 20 – an unprecedented plunge below zero that traders had not previously believed was possible.