Oil was headed for its longest run of daily
gains in 15 months after a drop in U.S. crude stockpiles added
to signs that a market upended by coronavirus lockdowns and a
producer price war is rebalancing.
Futures in New York rose for a sixth day past $34 a barrel,
the longest streak for the front-month contract since February
2019. American inventories fell for a second week and there was
a record draw in stockpiles from the hub at Cushing, Oklahoma,
Energy Information Administration data showed.
The big drop at Cushing, the delivery point for West Texas
Intermediate futures, shows the risks of a supply glut are
easing. In another sign traders are more sanguine about the
chance of storage space running out, the so-called WTI June/July
cash roll traded at 30 cents on Wednesday, the first time it’s
been above zero since December, according to Bloomberg data.
Crude has risen more than 80% this month as production cuts
have kicked in and demand has started to return in some markets.
However, there’s still a long way to get back to pre-virus
levels of consumption and there’s also a risk that a sharp jump
in prices for physical cargoes encourages output to come back
too early
“There’s growing optimism that you’re going to see a
continued pick-up in oil demand, and that’s heavily reflected in
prices now,” said Edward Moya, a senior market analyst at OANDA.
“However, higher prices are going to trigger some non-
compliance” with output cuts and WTI is likely to trade in a $25
to $35 a barrel range over the next two months, he said.
WTI for July delivery rose 2% to $34.16 a barrel on the New
York Mercantile Exchange as of 12:55 p.m. in Singapore after
closing up 4.8% at the highest level since March 10. Brent for
July settlement added 2% to $36.46 on the ICE Futures Europe
exchange.
A surprise increase in U.S. gasoline stockpiles reflected
underlying weakness in the world’s largest economy. Meanwhile,
Indian oil demand could take until the end of 2020 to get close
to full recovery, according to executives at the country’s
state-owned fuel retailers.
U.S. crude stockpiles fell by 4.98 million barrels, the
most since December, in the week through May 15, the EIA data
showed. Inventories at Cushing dropped by 5.59 million barrels,
or almost 9%, while gasoline stocks rose by 2.83 million
(Bloomberg)