Oil prices jumped on Monday boosted by output cuts and signs of recovery in demand for fuel as global economies have started easing curbs that were imposed to contain the spread of coronavirus.
Global benchmark Brent was up over eight percent to $35.31 a barrel as of 15:00 GMT. US West Texas Intermediate (WTI) crude soared nearly 12 percent to around $33 per barrel as its June contract expires on May 19.
The more actively traded WTI contract for July delivery rose eight percent to trade at $31.89, while the contract for August delivery was trading 7.4 percent higher at $32.33.
Monday’s growth comes after WTI’s historic plunge to below zero last month, a day ahead of its May expiry. Despite the third straight week of gains, prices are still well below January’s high, when WTI traded above $60 per barrel. Prices are getting support worldwide as countries start lifting lockdown measures and more vehicles are back on the roads.
The global coronavirus-triggered shutdown has pushed fuel demand to historic lows. Among other factors boosting crude is the fact that US energy firms are cutting the number of oil and natural gas rigs. Data from the US Energy Information Administration showed that production has dropped 1.5 million bpd below March’s all-time high level of 13.1 million bpd.
“Producers are significantly throttling back output and, with demand increasing, the market is on a slow path towards recovery,” said Rystad Energy’s senior oil markets analyst, Paola Rodriguez Masiu, as quoted by CNBC. “Faced with meager demand and unattractive low prices, production curtailments came faster and deeper than initially anticipated.”
Saudi Arabia, the world’s largest oil exporter, last week pledged to slash an additional one million barrels per day in June. OPEC+ wants to maintain existing oil cuts beyond June when the group is due to meet next.
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