Oil Resumes Rally With Prices Doubling Over Last Five Days – Yahoo Canada Finance

Posted: May 6, 2020 at 6:47 am

(Bloomberg) -- Oils rally resumed -- after prices doubled over five days -- amid optimism that output cuts are easing a huge supply glut and demand losses have bottomed.

Futures in New York rose above $25 a barrel after earlier breaking above their 50-day moving average for the first time since January. Russian oil production was down 16% in the first five days of May, Interfax reported, while Plains All American Pipeline LP sees close to 1 million barrels a day of Permian shut-ins in May. Output in North Dakota was down by 450,000 barrels a day, according to state data, though some shale drillers said they may restart output if prices rose above $30 a barrel.

OPEC+ began implementing 9.7 million barrels per day of production curbs on May 1, which along with some early signs of demand recovery has helped to ease fears the world will run out of storage space for crude and fuels. The Trump administration is pivoting to phase two of its virus response in an effort to reopen the nations economy.

While its possible the worst is over for oil markets, most analysts dont see a rebound to pre-virus levels of consumption for at least a year, with some questioning if it will ever happen. The risk of a second wave of infections in the U.S. as states reopen cant be discounted, while deteriorating relations between Washington and Beijing may hamper the global economic recovery.

The Russian news suggests a faster full compliance with cuts versus the past, said Giovanni Staunovo, commodity analyst at UBS Group AG. Theres also likely some technical buying from momentum investors.

Winners from last months oil market rout are now starting to emerge. Hedge fund Westbeck Capital Management, which posted its best ever month in April after being short oil prices in the front of the curve, said the bull case for crude is now simply exceptional. Pierre Andurands commodities fund is now up almost 70% this year after further gains in April.

U.S. crude stockpiles rose by 8.44 million barrels last week, the American Petroleum Institute reported, according to people familiar with the data. That would be the smallest increase since the week ended March 20, if confirmed by Energy Information Administration figures due Wednesday. Supplies at the storage hub at Cushing, Oklahoma, rose by 2.68 million barrels, the API said.

The markets focus will remain the state of crude oil inventories at Cushing and U.S. production, said BNP Paribas SAs Head of Commodities Strategy Harry Tchilinguirian. Last week, the market took some comfort from the fact that the pace of additions to Cushing storage moderated.

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Oil Resumes Rally With Prices Doubling Over Last Five Days - Yahoo Canada Finance

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