Oil steadied after a four-day gain as
investors weighed signs the market is rebalancing against what’s
still a precarious economic outlook.
Futures in New York for July delivery edged above $32 a
barrel after the June contract closed at a 10-week high as it
expired. Federal Reserve Chairman Jerome Powell warned Americans
could start losing their homes and that long-term unemployment
could damage the economy. A report that a virus vaccine study
that boosted assets earlier in the week didn’t produce enough
critical data to assess its success added to the cautious tone.
Still, the oil market is in much better shape than it was a
month ago as output cuts have kicked in and pockets of demand
have emerged. There was no repeat of last month’s plunge below
zero when the West Texas Intermediate contract rolled over, with
the June futures trading at a premium to July before they
expired, suggesting concerns the U.S. would run out of storage
have eased.
Oil has rebounded almost 70% this month as supply and
demand have started to rebalance, with Citigroup Inc. saying the
current crude surplus will turn into a deficit next quarter.
Chinese oil consumption is almost back to pre-virus levels,
while gasoline is benefiting across the world as commuters avoid
public transport and deliveries of food and other items surge.
See also: Gig Economy Drivers Are Fueling a U.S. Gasoline
Demand Rebound
“We’re a little surprised at how quickly oil prices have
bounced back in the past month,” said Vivek Dhar, a commodities
analyst at Commonwealth Bank of Australia. There’s potential for
prices to stay at these levels in the next month or perhaps go
slightly higher if stockpiles decline, he said.
WTI for July delivery added 0.5% to $32.11 a barrel on the
New York Mercantile Exchange as of 12:09 p.m. in Singapore after
rising 1% in the previous session. The June contract finished up
2.1% at $32.50 as it expired on Tuesday. Brent for July
settlement rose 0.8% to to $34.92.
In more evidence the supply response to the virus is
gathering pace, the American Petroleum Institute reported
stockpiles at the storage hub at Cushing, Oklahoma, fell by 5.04
million barrels last week, people familiar with the data said.
U.S. crude inventories dropped by 4.84 million barrels, the API
said. The official Energy Information Administration figures are
due later on Wednesday.
(Bloomberg)